Domino’s Pizza Enterprises has now rallied 10% from our entry-level. While DMP’s PE multiple remains elevated at 34x forward earnings, EPS growth is forecast to be 8 -10% and the FY21 yield is 1.9%.
We suggest traders use the short-term momentum indicators as a strategy to manage the timing of taking the short-term. We don’t consider Domino’s Pizza Enterprises a core portfolio holding and feel it makes greater sense to trade rather than hold.
The chart below shows the recent Algo Engine short signals in DMP. We look for the price action to test lower levels in the near-term as the lower high structure remains the predominate technical pattern.
Stay on watch as the last and final leg lower in the selling occurs. Investors can expect a sharp rally higher from oversold conditions, once we see DMP trade below $38.
DMP’s upgraded FY17 earnings guidance to NPAT growth of 30% and upgraded margin targets.
Group store openings guidance of 175-195 was maintained.
FY17 revenue $1.2b, EBITDA $250m, Net Profit $130m, EPS $1.48 & DPS $1.05 placing the stock on a forward yield of 1.5%. PE = 46x
The recent low on the 2nd of November created the first lower low pattern we’ve seen in DMP since December 2014. Nevertheless, with the earnings upgrade, it’s likely the stock price will bounce from here but we’re thinking momentum will fade once the rally gets into the $75 range.