Stock market

Is now the time to get a piece of the action and invest in this tasty growth stock?

Image Source: Domino’s Pizza Group plc

I love a good growth stock, as much as I love pizza. My favorite fast food brand is Domino’s. I’m such a big fan that I’m on the company’s email circulation list. Last week, in an attempt to promote his Weeknight Steel, I received a message that claimed:This is an absolute bargain.

I wonder if the same can be said about it. DP Poland (LSE:DPP), the company that operates the chain in Poland and Croatia. Can I be tempted to buy growth stocks? Let’s see.

Eastern Europe

The company opened its first store in Warsaw in February 2011. It now has 116 in Poland and four in Croatia.

Since September 10, 2023, its share price has increased by 73%.

In April, the company raised £20.5m from shareholders. The money will be used to buy more stores, refurbish existing stores, shift to a franchise model and pay down some debt. The share price is now higher than the offer price, which suggests that many investors are encouraged by the company’s growth plans – it wants to have 500 stores by 2030.

Impressively, despite Poland having one of the highest inflation rates in Europe in 2022, the company has also managed to improve its gross profit margin. During the six months ending June 30, 2023, it was 22.2%, 20.7% in 2022, and 18.2% in 2021. It shows that the business is being carefully managed and is selling products that people want to buy.

But the company is in loss. For the first half of 2023, it recorded an after-tax loss of £1.6m on revenue of £21m. However, its losses are decreasing. But based on its current margins, it needs to grow its revenue by more than a third to break even. That seems like a bit of a tall order.

Also, with a stock market value of £103m, it’s a small company. This means that he does not have the financial strength to withstand a significant shock to his business.

So, I don’t want to invest right now.

Close to home

But if I want to get a piece of the pizza business, there’s another option.

Domino’s Pizza Group (LSE:DOM) operates all restaurants in the UK and Ireland. It has a market cap of £1.35bn, which allays some of my concerns about investing in a smaller company.

Over the past five years, its share price has risen 29 percent.

The UK takeaway market is estimated to be worth £14.4bn, with the company claiming a 7.2% share.

But its underlying earnings per share fell slightly to 18.4p in 2023 (2022: 18.7p).

And its underlying profit before tax has been fairly flat over the past five years – £99m (2019), £101m (2020), £114m (2021), £99m (2022), and £102m (2023). It appears to be a solid, if unspectacular, performer.

Its gross profit margin is 46.5%.

The company is clearly not growing as fast as its sister in Eastern Europe. On the other hand, it is a more mature business, perhaps, not surprisingly. But I think other companies – in different sectors – have better growth opportunities. So I don’t want to take any position now.

So for now, I’ll stick to food instead of investing in companies that sell pizza.

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button