The Motley Fool

Should you buy a slice of Domino’s shares in 2020?

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has climbed more than 1,000% higher in the last decade to be valued at ~$48 per share.

However, with its New York-based parent experiencing slowing growth, could we see a share price slump in 2020?

What did Domino’s say about slowing growth?

As reported in yesterday’s Australian Financial Review (AFR) article, the latest financial result from Domino’s Pizza Inc. (NYSE: DPZ) failed to impress analysts.

Low growth and sluggish profit were evident in the US-based franchisor’s results, with the Domino’s Pizza share price falling 3.92% in yesterday’s trade.

One of the big issues facing Domino’s at the moment is the increasingly tight competitive environment in online delivery services.

Domino’s has had success in recent years thanks to its sustained push in the online delivery space, but UberEats and Co. have compressed margins and hurt revenues.

This was evident in the Aussie company’s August full-year result which was headlined by a 4% drop despite recording revenue up 24.4% to $1.43 billion.

How does this affect the Domino’s share price?

The Domino’s share price has been a strong performer on the ASX for the best part of 15 years.

However, signs of slowing growth might concern investors given the Domino’s share price trades on a price-to-earnings (P/E) multiple of 35.5x earnings.

Domino’s is a dividend-paying stock, which certainly helps ease the pain of an 8.27% drop in the share price over the last 12 months.

With this being said, that dividend yield is currently sitting at 2.41% per annum, which isn’t exactly worth buying just for income.

I’m not sure Domino’s shareholders will be sticking around for much longer without signs of further share price growth in 2020.

Foolish takeaway

While the Domino’s share price has been a consistent performer for a number of years, both the Aussie and U.S. businesses are showing signs of slowing growth.

Given where we appear to be in the cycle, I wouldn’t personally be buying in just yet and would be waiting for its half-year results in February.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.