The only analyst with a bearish view of Domino’s Pizza Group Plc has thrown in the towel.
Jefferies’s Darragh O’Sullivan upgraded the UK company to hold from underperform on Wednesday, citing slowing inflation for the ingredients it uses as well as the appointment of a new chief executive officer. That’s after the stock rose 45% in the year to date, ranking Domino’s as one of the top 10 performers in the UK’s FTSE 250 index.
The London-listed shares have been on a roller coaster in recent years, partly due to a commercial dispute with franchisees. The firm reached a resolution with its franchisees in late 2021, though soaring costs and the departure of former CEO Dominic Paul held the shares back last year.
Domino’s last month named company veteran Andrew Rennie as its new chief executive officer, and last week announced like-for-like second-quarter sales growth, new earnings guidance for the year and a fresh buyback program. The stock climbed as much as 3.7% on Wednesday.
“Cost inflation, franchisee friction, and lower top line growth previously kept us cautious on Domino’s,” O’Sullivan wrote in a note to clients Wednesday. “We see these challenges easing.”
Shares in Domino’s, which holds the Domino’s Pizza master franchise in the UK & Ireland, trade at about 21.4 times analysts’ forecast profit for the next 12 months. That compares with 26.7 times for Domino’s Pizza Inc. in the U.S. and 28.3 times for Australian counterpart Domino’s Pizza Enterprises Ltd., according to data compiled by Bloomberg.
--With assistance from James Cone.
