Will the Domino's share price continue to surge in August?

Is the Domino's Pizza Enterprises Ltd (ASX: DMP) share price a good buy or should you wait for the August full-year results?

| More on:
Picture of a Domino's pizza.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Will pizza be the key to outperformance in August?

Judging by the Domino's Pizza Enterprises Ltd (ASX: DMP) share price gains, that could be the case.

Domino's shares are up 5.0% in the last month while the S&P/ASX 200 Index (ASX: XJO) has edged 0.2% lower.

Why the Domino's share price is soaring

There have been no major announcements from the Aussie food company since mid-April. However, that hasn't stopped the Domino's share price continuing to climb.

One big factor has been Domino's ability to continue operating despite coronavirus restrictions.

Investors seem to be pricing in resilient future earnings, with Domino's shares jumping 40.2% to $75.52. In fact, Domino's is currently trading just 1.7% behind its 52-week high.

I think strong momentum and a lack of announcements make the company's August earnings result one worth watching.

It's been a long time since we've got an insight into Domino's financials and operations. That means the August 19 full-year result could help re-calibrate expectations for the Domino's share price.

Is the Domino's share price a buy?

I think the Victorian lockdown could be good for Domino's earnings. There are tight restrictions in stage 4 but food delivery is not one of them.

That means Domino's earnings could be resilient despite economic hardship in many industries.

I also think it's in a better position than many ASX 200 shares to pay dividends in the near future.

The one concern I would have is the lofty valuation. Domino's shares trade at a price-to-earnings (P/E) ratio of 49.1 and just shy of its 52-week high.

That means you're investing a lot of money for little immediate return. If you believe in the long-term growth story, that may not be a huge concern.

However, value investors may be turned off buying Domino's shares.

Foolish takeaway

The Domino's share price has had a strong year but I'm not sure the company's shares are particularly cheap.

If you're willing to wait, I think the August earnings result could provide a good reset point for the ASX share's fair valuation.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »