The Domino's Pizza Enterprises Ltd. (ASX: DMP) share price is down nearly 17% from the all-time high of $66.19 reached last month. So, does Domino's offer good value to investors right now?
Strong recent financial results
Domino's continues to perform well financially, driven by its growing overseas operations.
The company recently delivered a strong first-half result for the six months ended December 31. Domino's recorded network sales of $1.58 billion, which was up a very strong 10.6% on the prior corresponding period. Meanwhile, online sales grew by an even stronger 18.8% to $1.11 billion. These results were driven by the opening of 85 new stores and a very solid 4.1% increase in same-store sales.
Earnings growth also continues to be strong, with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increasing by 10% to $151 million. Underlying net profit rose by 6.4% in the half to $72.6 million.
Japan was a particular highlight with sales rising 12.2%, while Europe also saw strong growth with a 9.4% increase in sales. Australia and New Zealand (ANZ) saw a more modest sales rise of just 3.5%.
Domino's Australia is now showing signs of slowing growth, however, this is to be expected as the company matures in the domestic market. With maturity comes more market stability, and there is still plenty of potential for faster store growth in other overseas markets.
Why Domino's is well-positioned in the current turmoil
I believe that Domino's is unlikely to have significant exposure to the coronavirus in the months ahead compared to many other restaurants and fast-food operators.
Restaurants, in particular, where patrons normally stay seated for longer periods, are being strongly impacted in countries such as China and Italy, where the outbreak is currently more prevalent. This trend is now developing in many other countries as well.
The big advantage that Domino's has over other fast food restaurant chains is that it doesn't typically have a sit-down service, and any in-store pick-up by patrons is normally very quick due to online ordering with accurate pick-up times, thus minimising the possibility of exposure to the virus. In addition, Dominos does a lot of home deliveries.
Are Domino's shares a buy?
With a recent correction to the Domino's share price, driven by the current ASX sell-off which is amplifying today, I believe now is a good time to purchase Domino's shares at a far more favourable price.
I think there is potential for the Domino's share price to grow further due to its strong global brand, growing sales and a strong pipeline of future stores to open.
In addition, Domino's is a defensive type of share due to its relatively low-priced product offerings. This positions the company well to ride out any economic storm.
