The Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price has proved to be fairly resilient during the coronavirus crisis. Domino’s shares dropped as low as $41.66 in the early phase of the pandemic to be now trading back at $64.11.
Domino’s felt less of an impact than other global fast-food restaurant chains and stores who were required to close and are only now beginning to re-open.
So, does the Domino’s share price offer value to investors right now?
Getting back on track as coronavirus restrictions ease
Domino’s most recent market update was in late April. It revealed that Australian store sales had been generally consistent prior to the crisis, with a small impact on local trading conditions. France, which one of the worst-hit European countries during the early phase of the crisis, had begun re-opening its stores. New Zealand stores have also re-opened and stores in Japan and Germany were able to maintain strong sales growth during the worst of the crisis.
Domino’s had a key advantage over other fast food restaurant chains during the crisis as it doesn’t typically offer patrons a sit-down service. In addition, in-store pick-ups tend to be fast as they are optimised with an online ordering app with accurate pick-up times. Dominos also does a lot of home deliveries compared to other fast-food chains.
This last update from Domino’s was 2 months ago. With lockdown restrictions easing in its operating markets, I think that trading conditions have likely picked up further.
Medium-term growth outlook
Domino’s did not provide any short-term guidance in its April update. However, it’s anticipating solid growth over the medium term. It forecasts new store openings to be in the range of 7% to 9% per year and store sales growth to be between 3% to 6% per year.
So, are Domino’s shares in the buy zone right now?
The Domino’s share price regained all its losses during the early phases of the pandemic. It is also trading close to 12-month highs, so it’s not cheap from a short-term perspective. However, it’s important to note that it is currently trading well below its all-time peak in mid-2016.
I believe there’s strong potential for Domino’s shares to increase over the next 5 years through growing sales and a strong pipeline of future store openings.
So, despite some possible short-term headwinds due to the coronavirus, I believe its share price is a buy right now.
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Motley Fool contributor Phil Harpur owns shares of Domino’s Pizza Enterprises Limited. 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.
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