Is Domino's Pizza Group plc (LON:DOM) Potentially Undervalued?

Domino's Pizza Group plc (LON:DOM), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£3.12 and falling to the lows of UK£2.75. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Domino's Pizza Group's current trading price of UK£2.93 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Domino's Pizza Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Domino's Pizza Group

Is Domino's Pizza Group Still Cheap?

Great news for investors – Domino's Pizza Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Domino's Pizza Group’s ratio of 14.8x is below its peer average of 23.99x, which indicates the stock is trading at a lower price compared to the Hospitality industry. What’s more interesting is that, Domino's Pizza Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Domino's Pizza Group?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 5.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Domino's Pizza Group, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since DOM is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on DOM for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DOM. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you'd like to know more about Domino's Pizza Group as a business, it's important to be aware of any risks it's facing. For example, Domino's Pizza Group has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are no longer interested in Domino's Pizza Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.