It is fair to say that recent times have been hard Domino's Pizza Enterprises Ltd (ASX: DMP) shares.
Over the past 12 months, the pizza chain operator's shares have lost 40% of their value.
And if you go back even further to September 2021, it gets even worse. Since peaking above $160.00 that month, the stock has fallen a massive 80%.
But it wasn't always like this. Domino's Pizza was a magnificent Australian stock for a long time.
Years and years of strong earnings growth led to its shares delivering consistently stellar returns for its shareholders.
For example, from September 2011 to September 2021, Domino's shares rose approximately 2,300%.
You've heard of ten-baggers? Well, that's a 23-bagger!
Since then, though, this Australian stock has lost its magnificence due to a variety of reasons. This includes COVID and inflation headwinds and management's poor execution on key strategies.
But with the worst now potentially behind the company, is it a good time to invest? Let's find out.
Is this Australian stock a buy?
Goldman Sachs thinks that investors should be buying Domino's shares while they are down.
Particularly given a change of leadership, which was long overdue. Commenting on the new CEO appointment, it said:
Positive step up in system capabilities: while Mr van Dyck does not have a QSR background, we expect his near 3 decades experience at both Coca-Cola Enterprises and Compass Group as a professional executive will bring much-needed system management and planning capabilities to enable more precision execution and risk management of DMP across its 12 markets.
We expect such capabilities to include more efficient organization and incentive structures, financial planning and capital allocation discipline, cost and supply chain optimization, revenue management and marketing/promotional effectiveness. Appointing a CEO from outside the company also suggests the Board's determination to disrupt DMP's existing ways of working and inject new thinking.
In addition, the broker highlights that the Australian stock's focus on franchisee profitability is good news. And given its improving outlook, it feels that its shares are attractively priced. It 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.
Goldman has a buy rating and $39.10 price target on Domino's shares. This implies potential upside of 20% for investors over the next 12 months. In addition, a 3.5% dividend yield is forecast for FY 2025, boosting the total potential return beyond 23%.
