About: Domino’s Pizza Enterprises (DMP) is engaged in the operation of retail food outlets and franchise services. The Company holds the exclusive master franchise rights for the Domino's brand and network in Australia, New Zealand, France, Belgium, the Netherlands, Japan and the Principality of Monaco. The Domino's brand is owned by Domino's Pizza, Inc. which operates within the Quick Service Restaurant (QSR) pizza segment of the fast food market in Australia and New Zealand.

Why it’s in the portfolio:

Fundamentals: DMP currently trades on a price-to-earnings ratio of around 23x forward earnings. DMP is expected to pay a dividend of around 3% in a year or so (based the current share price) and with a projected payout ratio of around 73% should be able grow dividends quickly if the business continues to go well. EPS growth is also expected to be high, forward earnings at 139.4(cps).

What could go wrong: Domino’s is faced with the prospects of a slowdown in same-store sales growth throughout 2018 and coming in to 2019. While it is still likely that the roll-out of stores will accelerate as the year progresses, risks are building that these will occur later and make a smaller contribution to earnings. The European region also has a volatile history, and the franchise profitability in France and Germany must be lifted sufficiently to incentivise new store openings to meet existing targets.