The DOM share price has been range-bound since a break of the psychological 300p level, which has been support in recent months.
Bullish hammer-like candles on the weekly charts are positive, and prices have reacted higher to test the upside of a bullish channel formation. A clear break of the 370p area would open up the way for further gains.
Moving average convergence divergence (MACD) has moved into positive territory, and the daily Ichimoku cloud offers good support.
Medium term: Dominos enjoys a positive operating backdrop, with nine consecutive quarters of double-digit organic (like-for-like) revenue growth and a 5-year trend that continues to increase.
Longer term: E-Commerce is proving a significant distribution channel for the pizza chain, with FY2015 figures showing online sales ahead by more than 30% (App-bases top-line sales accounted for 48.6% of this figure).
Growth: PIA expects the global fast food market to continue to exhibit steady growth over the coming years on the back of increasing disposable income and a "time poor" consumer market
Recent results: At year-end, the management noted “2015 was a terrific year for Domino’s Pizza Group: the UK performance was outstanding, reflecting continued investment in our e-commerce platform. This underpins both our like-for-like results and the success of our new store programme. Our cash conversion is strong.”
Full year EPS: +18.6% over the period.
Standalone valuation: DOM has an Altman Z-score of 15.46 (a read of >3 generally indicates solid underlying company financials).
Competitor/industry valuation: Trades at a premium to its peer group on a number of forward metrics.
Operating profit trend: Moving higher once again, +16.6% for the period.
Dividend: Final dividend higher by 21.3% to 11.75p per share (2014: 9.69p) / Total dividend for the year 20.75p (up 18.6% versus previous year). Gross yield 1.87%.
FY2016 outlook: “During 2016 we expect to be opening around 65 new stores and will be investing in additional supply chain centres in the UK and Republic of Ireland...”
Stock sentiment: Institutional investor consensus is currently positive on the name, PIA Research says.
DOM is set to report half-year numbers on July 28.
For breakout buyers (B): We would highlight 375p (mid July 2016 highs)
For pullback buyers (P): We would highlight 315p (early April 2016) & at 285p
Stop: As low-risk market participants, we would recommend a hard stop loss @ 270p.
Target: 400p & 450p
Time horizon: 1-3 months
Source: Saxo Bank
Source: Saxo Bank
— Edited by John Acher
Non-independent investment research disclaimer applies. Read more