Earlier this week the Domino's Pizza Enterprises Ltd. (ASX: DMP) share price tumbled lower following the release of its full year results for FY 2019.
For the 12 months to June 30, the pizza chain operator reported revenue growth of 24.4% to $1.435 billion, a 7.2% lift in EBIT to $220.8 million, and a 6.1% increase in underlying net profit to $141.2 million.
This meant that Domino's yet again fell short of its guidance. Management had been targeting the lower end of its EBIT guidance of $227 million to $247 million.
One broker that thinks investors should overlook this is Goldman Sachs.
According to a note out of the investment bank, it has reiterated its buy rating and lifted its price target on the company's shares to $51.80.
This price target implies potential upside of over 20% for its shares over the next 12 months excluding dividends.
Why is Goldman bullish on Domino's?
One reason the broker remains bullish on Domino's is management's positive commentary around the execution outlook for Europe.
Goldman explained: "With a number of constraints (brand conversions, scale limitations and systems implementation) out of the way in most European regions, FY20 should see improvement in sales momentum and earnings leverage as DMP begins to step into organic growth mode across the region. DMP notes that significant store openings are forecast for Europe (and Japan) over FY20."
Overall, it expects this to lead to Domino's delivering revenue growth of 13.4% and earnings per share growth of 13.8% in FY 2020. After which, it expects its growth to accelerate in FY 2021 with 13.8% top line growth and 18.6% earnings per share growth.
Should you invest?
Whilst Domino's performance has been underwhelming of late, I agree with Goldman that it would be a good option at the current price. Especially given its solid long term growth potential from its store expansion plans.
Incidentally, Goldman has also reiterated its buy ratings on Coles Group Ltd (ASX: COL) and Qantas Airways Limited (ASX: QAN) following their results releases.
