Obviously the pros and cons of an acquisition are far more complex than this, but we don't have too much to go on, so it's the simplest analysis I can do - Cost 32m for a company making 3.5m profit, values the business at a PE of around 9, and hopefully synergies will be able to improve the profit figure. DOM currently on a PE of 22, so it looks like a good deal.
Summary, good Q3 recovery but canabilisation could still take it's toll and the share price looks pretty full. I must admit I'd be pretty pxssed off if DOM kept opening new franchises a couple of streets away -- doesn't look like a sound business approach.
Tempted to stop loss this one and sell if it approaches 400p
I confess to have been confused by the performance of the share price. it was recovering nicely, in line with what the company was saying about its prospects, then some broker downgraded them in mid June, and it was all negativity. All press comment, broker comment, BB comment etc seemed to be reading the last rights for the business. When the Interims came out I read them and they looked good, but I began to doubt my own analysis when all I could read was so negative. So this update coupled with the price reaction has reassured me that I have not gone doodle ally just yet.
Nice rise today after the Q3 Trading Update.
I continue to hold during all the volatility of this share.
Some of you guys make more money trading DOM but with my luck I would always be out before a big rise.
No mention of the German joint venture business though ?
Dominos (DOM) share price has surged over the last two weeks as stock has been bought back but Peel Hunt said there is further to go if the takeaway pizza chain can grow like-for-like sales more quickly.
Analyst Douglas Jack retained his buy recommendation and target price of 400p on the stock as the company undertook a 1.5 million share buyback over the last two weeks. The shares were flat at 306.9p yesterday.
What we said before still remains intact; if like-for-like sales start to accelerate and the buyback has to compete with short covering on the equivalent of 15% of the equity base, then the upward squeeze on the share price could be considerable.
Jack has confidence that third quarter sales will increase as Dominos will have benefited from poor weather and soft comparators but said the self-help initiatives of new innovation, pricing and advertising only started towards the end of the quarter, benefiting the fourth quarter of 2017 and the first half of 2018 more than the third quarter of 2017.
DS - IF the BoD are 'fighting the market' it will only harm them and make it more difficult for the SP to recover - markets are not easily fooled, and when BoDs try to 'manipulate news and the SP ('pull the wool' over anyone's eyes, let alone the markets), it isnt taken kindly! Trust is vital! AR
It looks to me that Peel Hunt are talking out of their bottom.
DOM is supposed to be a growth stock, so why are they spending our money on buying our stock. Have they got nothing better to invest it in ?
If it is now ex growth then why not increase the dividend or at least pay out a 'Special Dividend' ?
I suspect that the answer has more to do with the executive bonus scheme than maximising Shareholder value.
Time to move on IMHO.
Dominos (DOM) has started its share buyback programme, which Peel Hunt has taken as a sign of the takeaway pizza chains confidence in trading conditions.
Analyst Douglas Jack retained his buy recommendation and target price of 400p on the stock after the group announced it would commence a share repurchase programme of up to £15 million-worth of shares ending on 19 October.
In our view, the company would not do this if trading was deteriorating or if it planned to sink its capital into UK corporate stores, he said.
Dominos share buyback programmes tend to be weighted to the first and fourth quarters. The net return to shareholders under share issue in the cashflow has averaged just £6 million per annum over the last 10 years, because buying back shares has not always been easy to achieve.
However, he said that if like-for-like sales started to accelerate and the buyback has to compete with short covering on the equivalent of 15% of the equity base, the upward squeeze on the share price could be considerable.
The charts look interesting, sort of gold cross type of interesting. Interesting report from WSJ:
By Stephen Wilmot
The U.S. could be the next domino to fall, and investors have yet to cotton on.
Domino's Pizza has enjoyed an exceptional run, thanks to a drumbeat of outlet openings, prescient technology investments and missteps by key rival Pizza Hut. But, as the takeout chain's overseas sister companies have shown this year, it is hard to keep up the pace.
Three public companies fly the Domino's flag. The original one, listed in New York, issues franchises to U.S. outlets while licensing the brand to so-called master-franchise owners abroad. London-listed Domino's Pizza Group PLC runs master franchises in the United Kingdom and a few smaller countries, while Sydney-listed Domino's Pizza Enterprises Ltd controls them in Australia, Japan and France, among others.
The U.S. company, Domino's Pizza Inc., has remained a stock-market darling even as its U.K. and Australian peers have lost their shine. Domino's Pizza Group PLC stock has fallen 32% since the company put out weak numbers in March. Last week, Domino's Pizza Enterprises Ltd reported slower growth than management had hoped, sparking a 19% plunge in the shares.
One problem is competition. Domino's was an early adopter of digital systems, allowing the companies to take market share as consumers started ordering on their phones. Now others are catching up, helped by the proliferation of aggregator apps such as GrubHub and Just Eat and delivery apps like Deliveroo and UberEATS. The trend is perhaps most mature in the densely populated U.K., which took a similarly early lead in e-commerce.
Another headwind in some countries, notably the U.K. and Japan, has been a strategy of splitting delivery areas, which boosts overall sales but cannibalizes same-store growth. The London-listed Domino's now excludes these splits from same-store growth, otherwise the number would have turned negative in the second quarter, according to Howard Penney of research company Hedgeye Risk Management.
Whatever the strategy's merits, investors have concluded the U.K. market for Domino's outlets is getting crowded. The shares now trade on 18 times earnings, their lowest since 2009.
The chain continues to post expectation-busting results in the U.S.: Same-store sales rose 9.5% year over year in the second quarter. And international franchise income accounts for such a slender slice of the New York-listed company's revenues that investors have largely shrugged off worries from abroad. Even after a wobble last month, the shares are only 18% off June all-time highs.
But it is almost certainly only a matter of time before U.S. growth slips. Market leader Pizza Hut has been ceding market share for the past half-decade, mainly to Domino's, but franchise owner Yum Brands is now funding a comeback. As delivery companies work out how to deal with American-style suburbia, both pizza chains will have to compete with all sorts of other options. On 30 times earnings, Domino's Pizza stock is baking in too many extra toppings.
Write to Stephen Wilmot at [email protected]
(END) Dow Jones Newswires
August 25, 2017 12:24 ET (16:24 GMT)
Copyright(c) 2017, Dow Jones & Company Inc.
IASC - glad you are OK and still watching carefully- I must say I am V glad I don't hold DOM currently - I also think markets 'seem' to have a choppy Autumn ahead of them!!! Hope I am wrong, but I do have a cash IF there is some turbulence! (Buy Low and sell High!!! Its a good method, but not all that easy to effect! AR
I have never used a local company before other than when I was on holiday. I have no position here, but just checking things out that catch my eye that I can learn from. Heavy volume gap which falls below 200 day moving average springs to mind.
Dire reviews on Trust Pilot - seems they are not hidden like Purple Bricks. Big sell off before drop. I just ordered a Dom, not good value compared to a local company where I could finish the meal for the same price.
MW .... and IF markets hit tougher times? Right now there seem a lot of nerves out there... (and I will try and avoid 'second guessing' too much what markets will do), BUT a second trip 260p looks a reasonable possibility short term.... and IF 260p is then breached.....??? AR
(as you will have 'devined' I am a bit nervous of markets right now, and what they have in store for this Autumn.. in my books they 'look' a bit vulnerable. So I remain on the cautious side for now!
(What is going on with Trump? - chucking the (very unpleant) Steve Bannon overboard isnt going to ease nerves much I would have thought. The Mooch has gone... now Bannen... come on Trump!)
My thoughts and best wishes go out to those caught up in the Barcelona horrors
This relationship is getting messy. Not sure a party should be its own franchisee, which it effectively it is now. But I guess it will give other franchisees some reassurance that they are not going to rip them off!
The financial press and brokers concentrate so much on % growth; but they don't seem to understand %s. You can only compare %s if they start from the same base. Here's a simple example. If one car accelerates from 20 mph to 30 mph in a minute. it has increased its speed by 50%. If another car accelerates from 40 mph to 55 mph, the speed increase is only 37.5%; but the latter has accelerated at 15 mphpm compared to the first which is 10 mphpm. So the acceleration of the 2nd car is actually 50% greater than the acceleration on the 1st car; but financial press would say the speed increase has diminished from 50% to 37.5%.
The larger a business gets the lower the % growth it's capable of.
Keith Ashworth-Lord doesn't get many investments wrong in the long run. I hadn't noticed he had increased his stake recently, just read his comments.
Hboy - and IF marlets jave a wobble? I think all bets are off! Currently its a bt of a tough call... I feel a bit of a general market corrrction seems due - but who knows? I could be wong OF COURSE! AR
Yes Hardboy, I also noted that Keith Ashworth-Lord has actually topped up his holding of Dominos following the recent share price fall so can not have any concerns about the company. My opinion is that that growth is slowing in the UK but there is nothing fundamentally wrong with the very profitable business of selling pizzas and there are growth opportunities in the company's overseas territories. My only concern would be if the move to digital sales was having an impact but in the past this has been seen as favouring Dominos so I am not aware of concerns here. I will obey my normal rule and will not sell as nothing fundamental has changed in this business.
I've read a couple of comments over the last few days from people who are usually worth reading - Rodney Hobson, a columnist at Morningstar & Keith Ashworth-Lord who manages the Buffetology Fund, which holds Domino. Both think the market has treated them baldy and the fall is overdone.
"However, IF, I say IF, this is a base, then from here to the the second peak (394.7)"
On reflection, and second glass of a very good Chilean pinot noir - If we have a good base do we make a margherita, a double peperoni or even add a few more topping and a side order? Seriously ROCE is over 50%. I have held from 2009 and will continue to do so but thanks for your reading of runes.
My tealeaves have 260p as a buy but on the way back up from???? Could even be as low as 160. I have values 220-230 but IOMIN has 200-220. I am an investor and not selling on the way down and definitely not selling on way back up, even at 394.7.
Facinating that the PH analyst suggested 400p as his target (ie the level of the second peak, and from which point the fall has been spectacular! - the SP failed to break above 400p (395p) on the second peak peak in March 2017, and performed a 'classic double top reversal pattern' - the big Q is will the SP have the strength, and fundamental financial strength behind it to break above that key area, should it get tere?!!!!
Dominos Pizza: Peel Hunt still wants a slice of the action
Half year results from takeaway chain Dominos Pizza (DOM) has given the bears enough to worry about but Peel Hunt said it would rather focus on the positives.
Analyst Douglas Jack retained his buy recommendation and target price of 400p on the stock following interim results. The shares edged a penny lower to 266.4p yesterday.
In our view, the interim results had something for everyone, he said. The bears can dwell on the second quarters weak like-for-like sales, the first halfs lack of margin growth and the lower profits/store for franchisees. The bulls can highlight the first halfs perfect storm, the potential for new initiatives, the business cashflow and franchisees choosing to accelerate expansion even though Dominos has cut incentives. We are with the franchisees and would prefer to look forward.
He added that the UK business was capable of recovering to c.5% like-for-like sales, which should trigger a rerating.
Itdya - your post is very rational, and the truth is that sentiment has been on the decline since the sell signal in March! Its the story of a stock - if it ever becomes hot, there will come a day when it is not! All driven by sentiment of course.
Its the old story of success breeding success, but it is clear that ever since the SP found it didnt have the strength to get above the first peak, the sell off has been pronounced (a double top reversal pattern no less!) I find it all very fascinating, but we are all creatures of habit, and so often folks hang on, still clinging on to 'yesterdays' story/news. ATB AR
Personally I'm surprised the SP held up as well as it did; given the numbers I was expecting significantly worse.
It's not that they are dreadful numbers for a mature,stable, ongoing business, it's not that there isn't some growth and quite a lot of cash, just that DOM has been priced as a high growth stock and these numbers are definitely not those of a high growth stock, more one moving (moved?) from high growth to more stable (i.e. slower) hence the sell-off.
When any share is highly rated it has to basically keep churning out fabulous numbers just to keep breathing the rarefied air exists up there. The old rating cannot be justified by these numbers so it won't be going back anywhere near those levels unless they can return pretty immediately to the old growth levels.
No business can keep growing massively faster than the economy forever; eventually the market becomes saturated and then you have the opposite - pizzas become a commodity and it's pile them high, flog them cheap or die. I doubt we are actually at that point yet but how many pizzas can people actually eat?
This is one of 3 announcements I skipped through this morning - all seemed positive to me, yet all have reacted with drops in price.
I think you're both right - at the moment market sentiment is against DOM; but the indications are that there is still considerable growth in their business with a target of increasing the UK stores by over 60%; and the Nordic business showing early promise. Debt has increased, but, of course, so have the assets.
So my view is for holders to hang on and console themselves with a dividend which beats bank interest until sentiment changes; and for interested outsiders to keep a steady eye & ear on it & try to judge when markets begin to get a bit more positive.
games - "hammered -- yet results ok except for debt increase and statutory EPS down." Your view sounds a little like an excuse for DOMs performance, and that doesnt bode too well in my view - the debt issus maybe worries the market as it seems concerned about the cost of debt rising soon. I am just glad I took a (small) profit recently, as I would be over a grand down at todays price. It is going to be very interesting to see whether buyers come in soon, but as I said 'sentiment 'seems' a little fragile at the mo - lets just hope DOM can get back into positive mode soon, with a better SP. Best of Luck to all - AR
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