Despite underperforming the market's expectations over the last 12 months, the Domino's Pizza Enterprises Ltd (ASX: DMP) share price has actually been a market beater with a gain of approximately 9%.
The good news for investors is that the pizza chain operator's share price could still go higher from here according to one leading broker.
According to a note out of Goldman Sachs, its analysts have retained their buy rating and $50.50 price target on the company's shares after it announced plans to enter the Denmark market.
This price target implies potential upside of 15.5% for its shares over the next 12 months.
Why is Goldman bullish on Domino's?
The broker believes that the expansion into Denmark makes a lot of sense given that it borders the existing franchise territory of Germany. This could lead to greater utilisation of fixed capital in the region.
Though, it is not expected to be a game changer for the company. If Domino's eventually grows its network in Denmark to the targeted 150 stores by 2025, this will represent just 3% of the company's estimated network at that point.
Goldman sees Japan and the Benelux regions as the main drivers of growth for the company in the medium term. It believes there is a lot of headroom for store roll outs in these markets that will support solid earnings growth.
In addition to this, its analysts think the expected aggregator partnership in Europe is likely to provide support to growth there.
Should you invest?
I agree with Goldman Sachs on Domino's and believe its plan to almost double its store network within 6-8 years means it is a great long-term buy and hold option for investors today.
I would suggest investors consider it along with fellow food shares Collins Foods Ltd (ASX: CKF) and Costa Group Holdings Ltd (ASX: CGC). I think that all three companies have positive long term outlooks and trade at attractive prices today.
