Why Domino's Pizza Group plc (LON:DOM) Could Be Worth Watching

While Domino's Pizza Group plc (LON:DOM) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£3.39 at one point, and dropping to the lows of UK£2.45. 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£2.45 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.

See our latest analysis for Domino's Pizza Group

Is Domino's Pizza Group Still Cheap?

According to my valuation model, Domino's Pizza Group seems to be fairly priced at around 12% below my intrinsic value, which means if you buy Domino's Pizza Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £2.80, then there’s not much of an upside to gain from mispricing. Furthermore, Domino's Pizza Group’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will Domino's Pizza Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Domino's Pizza Group's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? DOM’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on DOM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Domino's Pizza Group at this point in time. Be aware that Domino's Pizza Group is showing 3 warning signs in our investment analysis and 1 of those can't be ignored...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.