UBS thinks Domino’s Pizza deserves to trade at a share price premium to peers because of its superior growth outlook.
A short time ago, the shares were up 2.8% to $67.00.
“Technology innovation and operational efficiencies have been key drivers of growth,” says UBS in a note to clients.
Domino’s has beat its guidance seven out of eight times over the last eight years by an average 5% and successfully made a number of acquisitions including Japan and Germany.
Its share price has fallen by around 20% since highs in August despite consensus upgrades.
Over the past five years Domino’s has grown like-for-like sales at an average rate of 8.1% a year, outperforming the fast food industry at 3.3%.
And UBS sees further growth ahead, as this chart shows:
Domino’s is the largest Pizza player in Australia and New Zealand but it still has only a 4% share of the $23 billion takeaway market.
UBS says there’s room to move higher despite a high price-earnings ratio of 47.
In August, Domino’s announced a 32.7% rise in full year sales to $1.964 billion and underlying profit after tax was ahead of guidance at $92 million, a 43.6% rise and a record.
UBS has upgraded Domino’s to a Buy recommendation with a 12 month price target of $79.70.