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Domino's share price: where next following interim results?

Though Domino's emphasis is on delivering cheap pizza, its stock currently trades at a significant premium to the market.

Domino's share price in focus Source: Bloomberg

Domino's share price: interim results in focus

Domino's Pizza Enterprises (ASX: DMP) reported a solid set of Interim Results this week, touting double-digit growth across all of the Group's key operational metrics.

Speaking of these results, the Group's visionary CEO – Don Meji – said:

'We closed the last decade with more than 780 stores and $700m in total network sales. We ended this decade with almost 2,600 stores, $3b in sales this year, and confidence the strategy that has delivered this performance will allow us to more than double our store count and network sales in the next decade.'

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On the top-line, Domino’s reported that H1 network sales rose 10.6% to $1.58 billion; while online sales got an even larger boost, climbing 18.8% to $1.11 billion.

On the bottom-line, the company recorded equally strong growth, with Domino’s international franchises delivering particularly good results. Overall, earnings (EBITDA) came in at $151.0 million, while international EBITDA climbed to $86.2 million and now represents ~57% of Group EBITDA.

Though the stock has pulled back today – in-step with broad market weakness – the Domino’s share price is still up more than 7% in the last five trading sessions.

In the last six months the stock has done even better, rising approximately 46% in that period.

Interestingly however, though Domino's may offer cheap pizza, the stock currently looks expensive by historical standards: currently trading at 42x FY19 earnings. The ASX 200 is currently trading on a ~21x earnings multiple, by comparison.

For income-focused investors, Domino’s this week also announced an Interim Dividend of 66.7 cents per share.

The outlook and analyst view

Looking at the early results from H2, the company noted that it was pleased with the Group’s performance thus far: with same store growth coming in 6.3% higher during the first weeks of H2 trading.

Finally, though the stock has appreciated in value significantly over the last six months, the current analyst consensus potentially suggests that DMP has run slighlty ahead of itself. As it stands, the average 12-month price target on Domino’s (ASX: DMP) stands at $58.18 per share, according to Bloomberg Data.

Should analysts be proven correct, it would imply downside potential of around 7% at current price levels.

Not only that, but 50% of analysts currently rate Domino's a Sell, according to Bloomberg Data.

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