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Why the Domino’s share price gained 30% in the first half of 2020

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has been a particularly positive performer in 2020.

During the first half of 2020, the pizza chain operator’s shares rose by an impressive 30%.

This compares to a decline of ~12% for the S&P/ASX 200 Index (ASX: XJO) over the same period.

Since then the Domino’s share price has continued to rise and even hit a record high of $75.00 last week.

Why is the Domino’s share price on fire in 2020?

Investors have been buying the company’s shares in 2020 after it continued to deliver solid sales growth from the majority of its businesses during the pandemic.

In its update at the end of April, Domino’s revealed that its operations in Japan and Germany have continued their strong sales performance since the end of the first half. Sales in Japan were particularly strong according to management.

And in Australia and Europe (excluding France), its same store sales have been positive during the second half. The company’s French stores were closed for a period during the pandemic, as were its New Zealand stores.

All in all, combined with its strong first half performance, this appears to have positioned Domino’s to be one of the few companies on the ASX 200 that will deliver a solid full year result in August.

Positive long term outlook.

In addition to its near term performance, investors have also been buying Domino’s due to its positive long term outlook.

Management has reiterated its plan to target new store openings of 7% to 9% per annum and same stores sales growth of 3% to 6% per year over the next five years.

If it delivers on these targets, it should underpin solid earnings growth over the period and could drive the Domino’s share price notably higher.

It is for this reason, that I would still be a buyer of its shares even after its strong gains in 2020.

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Motley Fool contributor James Mickleboro 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.

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