A shocking trading statement in February sent shares in Dominos Pizza Group (LSE: DOM) packing and, while since bouncing off of the lows, the takeaway titan is yet to crank higher again. Indeed, the stock remains 21% lower from its pre-release levels.
Look, Im not going to pretend that the foodies full-year financials didnt throw up some serious cause for concern. Like-for-like sales at Dominos grew just 1.5% during the first nine weeks of 2016, the company advised, an eye-watering reduction from the 7.5% advance enjoyed during the whole of 2016.
While the structural market for the takeaway sector remains strong, Dominos has suffered more recently as competition from the likes of Pizza Hut has heated up. But I believe the step back from record sales growth should not prompt investors to panic as the companys multinational expansion strategy still offers a tremendous amount of upside.
Dominos famously hiked its UK store target in November to 1,600 sites from its prior target of 1,200, and the company plans to have 80 of these outlets up and running by the close of the year.
And the pizza powerhouse also sees huge potential overseas. Not only does the company plan to boost the number of stores it operates in Europe by around 300% (to 400 outlets), but Dominos also remains busy on the acquisition front to boost overseas sales, the company more recently buying out Norwegian rival Dolly Dimples in March for 4m.
The City certainly expects Dominos Pizza to keep on delivering the goods, and while some analysts have cut their estimates following Marchs update, the business is still anticipated to keep on grinding out delicious earnings growth for some time yet.
Indeed, the number crunchers expect Dominos to report bottom-line expansion of 11% in both 2017 and 2018. And I reckon the prospect of delicious, double-digit earnings growth further out merits a slightly-toppy forward P/E ratio of 20.8 times.
The business of catching so-called falling knives is always tricky, needless to say. But I strongly believe Dominos could be on the cusp of a fresh move higher as the fruits of huge expansion, allied with the impact of massive investment in the fast-growth digital channel, becomes clear.
Take a sip
Like Dominos, I reckon the vast amounts Whitbread (LSE: WTB) is throwing into spreading its international wingspan should also deliver exceptional profits growth in the coming years.
Whitbread saw group sales chug 8.2% higher in the 12 months to February 2017, to 3.1bn, with sales at Costa Coffee rising 10.7% as the installation of new stores across the globe (not to mention its highly-popular Costa Express machines) paid off. And the 3,816 gross new UK rooms at Premier Inn helped push sales here 9% higher from a year earlier.
Solid demand for Whitbreads cut-price beds and premium coffee has seen earnings bound relentlessly higher in recent years, and the City expects this trend to continue with expansion of 4% in fiscal 2018 and 8% the following year.
And while a prospective P/E ratio of 16.6 times is great value given Whitbreads exciting growth plans, in my opinion, I reckon this could lay the foundation for a significant share price re-rating.
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