I believe Domino’s Pizza Group (LSE:DOM) could be a great growth stock to buy now. Let’s take a closer look at some fundamentals to help me build my investment case.
The world’s leading pizza delivery company
As a quick reminder, Domino’s is the UK’s leading pizza delivery brand, with a strong presence in the Republic of Ireland and throughout the world. It opened its first UK location in 1985 but has grown to over 1,200 stores in the UK and Republic of Ireland as I write. With its 35,000 employees, it sold over 105m pizzas last year!
So what’s happening with Domino’s shares currently? Well, as I write, they’re trading for 254p. At this time last year, the stock was trading for 399p, which is a 36% drop over a 12-month period. I’m not concerned by the share price drop, in fact, I view it as an opportunity to buy the dip in a quality business.
A growth stock with risks
Firstly, macroeconomic headwinds at the moment will be playing a part in the Domino’s share price decline. These include soaring inflation, rising costs, and a global supply chain crisis. Rising costs could take a bite out of profits and supply chain issues could affect operations and sales too. Many other UK shares are also suffering due to the issues noted above.
Next, due to the current issues noted, a cost-of-living crisis has emerged in the UK. This could have a material impact on Domino’s performance and level of returns, at least in the shorter term. Consumers may spend less on takeaways, and look for cheap alternatives as they tighten their belts. This is a development I will keep a close eye on.
The investment case
So to the positives then. For any growth stock I am interested in, I review a firm’s journey to date. I am buoyed by Domino’s growth story in recent years as well as its current position in its respective market. It has the experience and know-how to continually move with the times, increase its footprint, and boost its balance sheet. I do understand that the past is not a guarantee of the future, however.
Next, Domino’s shares would boost my passive income stream through dividend payments. At current levels, a dividend yield of close to 4% is enticing for me, although I am aware that dividends are never guaranteed.
Despite shorter-term challenges, I believe Domino’s could continue growing, based on recent trends. I am referring to the rise in takeaway options, as well as the rise in online delivery platforms that consumers use to order food straight to their door. With Domino’s presence, it can leverage this into sales and boost performance and returns, in my opinion.
Finally, Domino’s shares look decent value for money on a price-to-earnings ratio of 15. The recent price drop has made the shares look more attractive and I believe they could head upwards once more.
Overall, I like the look of Domino’s shares and would buy some for my holdings. Food is a staple after all, and based on recent trends like the increasing number of takeaways consumers order, coupled with its profile and presence, I believe Domino’s could be a great growth stock to buy and hold.
The post This well-known food retailer could be the perfect growth stock! appeared first on The Motley Fool UK.
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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Dominos Pizza. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.