On the hunt for a potential ASX bargain?
Then you may want to run your slide rule over Domino's Pizza Enterprises Ltd (ASX: DMP).
Shares in the S&P/ASX 200 Index (ASX: XJO) fast food pizza retailer closed yesterday trading for $33.12.
That sees the Domino's share price down 10.27% over the past month and more than 44% year to date.
So, does that now make Domino's shares a compelling ASX bargain?
Let's dig in.
Image source: Getty Images
Why did the Domino's share price tank over the month?
Before determining if it is a compelling ASX bargain buy, it's important to understand what put Domino's shares under renewed selling pressure this past month.
Now, the bulk of the monthly share price fall came yesterday, with the Domino's share price crashing 8.23% to end the day at $33.12.
This came as investors reacted to a business update released by the pizza company after market close on Wednesday.
Investors were overheating their sell buttons, potentially into ASX bargain level, after Domino's said it would close as many as 802 low volumes stores across Japan in an effort to rein in costs and improve margins. Japan is one of the regions the company's business has been struggling.
On the plus side, management said many impacted Japanese customers should be able to receive their orders from neighbouring stores. The company forecasts a return to positive same-store sales in Japan in FY 2025, along with improvements in its core margins.
Domino's also said it will shutter 10 to 20 stores in France in FY 2025, another nation where profits have been difficult to come by.
Is Domino's now a top ASX bargain share?
I think that for investors with a longer-term horizon, the past month's sell-down positions Domino's as a top ASX bargain right now.
As Motley Fool analyst James Mickleboro noted yesterday, "Management continues to see opportunities to grow its network to 7,100 stores over the long term. This is 1.9 times the size of its current network."
Goldman Sachs is also relatively bullish on its outlook for the fast-food pizza retailer.
Although the broker has a 'neutral' rating on Domino's shares, it has a price target of $36.30. That represents a potential upside of more than 10% from yesterday's closing price.
Following Domino's update yesterday, Goldman noted, "We view this announcement as an incrementally positive step in restoring quality of the store network in the business, without significantly damaging" its earnings before interest relative to consensus expectations.
With the closure of the low-performance stores in Japan and France, Goldman added, "We are seeing that the company is taking more proactive steps to restore a quality franchise network that will enable healthier sustainable growth."
With that longer-term sustainable growth in mind atop the past month's share price plunge, Domino's now certainly looks like an ASX bargain share to consider.
