What happened to the Domino’s share price?
Domino’s Pizza Enterprises Ltd [ASX:DMP] is a fast food retail and franchise business. DMP hold the exclusive rights to the Domino’s brand in Australia, New Zealand, France, Belgium, Japan, the Netherlands and Monaco.
At the time of writing, DMP shares were trading at $67.05.
Why did Domino’s shares do this?
DMP shares recently reached an all new high of $70.29 in the middle of May.
The push towards $70 per share is likely to come from two recent research reports, both from the same company. In the start of April, Morgan Stanley had a price target of $70 per share, only to revise that to $80 per share four weeks later.
As the end of financial year looms, I expect to see the stock sell off as investors take profits and fund managers start to dress up their returns for the year.
In the last 18 months, DMP has soared from $25 per share to its current level. If you’d bought in at that price and are still holding DMP today, you’d be sitting on a 167% gain.
Considering the S&P/ASX200 is down 0.51% in the same period, it’s easy to see why investors flock to this stock.
For the past decade, the company has consistently increased revenue and net profit.
Domino’s Pizza Enterprises End of Financial Year Result
Source: CMC Markets
However it’s the last three financial years which have seen explosive growth.
DMP is rapidly expanding into the European market. And unlike many of their competitors, they’ve been quick adopters of technology.
Last year the company paid a 51.8 cents dividend. I expect this to be higher again this year, as the interim dividend was 34.7 cents, up from 24.6 cents for the corresponding period.
As the markets continue to see-saw, DMP shares look like a safe place to park some dough for investors.
Aussies are chasing companies like DMP for their dividend and potential capital growth. Even with it’s incredibly price to earnings ratio of almost 70 times, Aussie investors are still happy to buy DMP stocks.
What now for Domino’s?
I’ve been a fan of DMP for quite some time. However, the current P/E means investors might want to avoid this stock for now. The volatile price does create opportunities for short term traders, however.
DMP shares historically trade downwards before the end of financial year, and then start to rise around the time end of financial results are announced. If you are looking to own this expensive stock, that window would be your opportunity.
Money Morning Australia