The Domino's Pizza Enterprises Ltd (ASX: DMP) stock price has suffered significantly over the past two years. Hence is this the right time to sell or buy the ASX stock? While it's down over 60% from 2021, it has gone up more than 17% in the last six months.
Domino's has a presence and has the exclusive master franchise rights in countries including Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany, Luxembourg, Taiwan, Malaysia, Singapore and Cambodia.
Keep in mind that the Domino's brand is owned by Domino's Pizza Inc, a listed US company.
What's the latest?
The latest trading update came at the annual general meeting (AGM) which revealed network sales growth of 12.7% and same-store sales (SSS) growth of 2.7% in the financial year to date at the time of November 2023. This may have helped the recent Domino's stock price recovery.
Same-store sales were positive in the financial year to date in 10 of the company's 12 months, with Japan and Taiwan being the markets that were suffering.
Its troubles have partly come from the fact that it lost some value-focused delivery customers in the past financial year after pricing changes (to try to offset inflation) did not resonate with customers.
However, the removal of a delivery service fee, the launch of new products and a global partnership with Uber has meant Domino's is serving more customers.
Domino's suggests consumers are "choosing high-quality pizzas as they seek an affordable treat in the face of cost of living pressures" which Domino's is calling "treatflation".
The business said it's on track to deliver against "a range of strategic initiatives to restructure the business, reduce costs and reinvest in rebuilding franchisee partner profitability." This is encouraging them to look at opening more stores.
Domino's is expecting earnings in the first half of FY24 to be "materially higher" than the FY24 second half. It's also expecting to report growth in the second half of FY24 compared to the first half of FY24.
Over the long term, it's aiming for 7,100 stores by 2033. This increased scale could add a lot to revenue, while an enlarged business could mean stronger profit margins too. Expansion into new, sizeable markets could accelerate it towards its targets.
Domino's stock price valuation
According to Commsec, the business is trading at 29 times FY25's estimated earnings. That is a fairly high valuation, but it's much cheaper than a couple of years ago.
I think it could be a decent time to buy Dominio's stock because of the heavy fall, the resurgent trading activity, the reduced rate of inflation and the growing scale advantages it's creating.
