2024 has not been kind to Domino's Pizza Enterprises Ltd (ASX: DMP) shares.
Since the start of the year, the ASX 200 stock has lost over 40% of its value.
While this is disappointing for the pizza chain operator's shareholders, is it a buying opportunity for others?
Let's take a look at what one leading broker is saying about this stock.
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Is this beaten down ASX 200 stock a buy?
According to analysts at Goldman Sachs, now could be a great time to snap up the company's shares.
This is because after a couple of years of struggles, the broker believes that the good times could return soon. Especially given management's focus on franchisee profitability, which will see it close a large number of underperforming locations overseas.
In addition, it notes that inflationary pressure on costs is easing. This will be a big boost for the ASX 200 stock. After all, it's hard to sell pizzas at low prices when the costs of goods sold (COGS) are driven high by inflation.
In light of this, it feels that Domino's shares are trading on an undemanding multiple and that current levels represent an attractive entry price.
Commenting on its buy rating, the broker said:
We have a Buy rating on the stock, as we believe management's focus on franchisee profitability through closure of 80/20-30 locations in Japan/France will help to material improve the quality of the network and help franchisee profitability. With COGs inflation moderating and the company focusing on execution of quality stores, we expect that store growth will be restored following a digestion period. DMP is trading at an undemanding PE valuation relative to its LT average and as such we believe the stock now offers an attractive entry point.
Good returns
The note reveals that Goldman has a buy rating and $40.00 price target on the ASX 200 stock.
Based on its current share price of $33.45, this implies potential upside of just under 20% for investors over the next 12 months.
In addition, due to its depressed share price, the company now offers a relatively attractive dividend yield.
For example, Goldman Sachs expects an increase to $1.19 per share in FY 2025, then $1.45 per share in FY 2026, and finally $1.73 per share in FY 2027. This will mean dividend yields of 3.6%, 4.3%, and 5.2%, respectively.
All in all, investors would get a total return of approximately 23.5% over the next 12 months if Goldman Sachs is on the money with its recommendation.
