Springwood, Australia (4E) – Domino’s Pizza’s international franchise, Domino’s Pizza Enterprises Limited (DPE), has reported a 50 percent increase in net profit before interest, taxes, depreciation and amortization (EBITDA) during its fiscal year ending in June.
DPE (ASX:DMP), which holds the master franchise for the American pizza chain in Australia, New Zealand, France, Belgium, the Netherlands, Monaco and Japan, said in a press release that it posted a $42.7 million (45.8 million Australian dollars) EBITDA that raised dividends by 18.8 percent to 33 cents per share. The company is paying the dividend on Sept. 12.
The profit growth was attributed to additional sales from DPE’s record number of new stores, including 44 new stores in New Zealand, 27 in Europe and 61 in Japan. DPE’s newly launched digital platforms such as Offers App, Pizza Chef and digital wallet options via PayPal in Australia and New Zealand also contributed to online sales growth.
“During the past 12 months in particular, we have invested in our electronic commerce capabilities to ensure we remain relevant to our customers’ changing preferences,” DPE CEO and Managing Director Don Meij said.
Product innovation, coupled with strong promotional campaign execution in all six markets, has also contributed to the profit result. The good performance gave DPE a high price-to-earnings (PE) ratio, a gauge for rating stocks as cheap or expensive. Brisbane Times stock analyst and columnist Marcus Padley puts DPE’s PE at 40x but cautioned shareholders against selling.
“The stocks with the highest PEs are often the stocks with the highest return on equity, the highest earnings growth and see the most rapid reduction in PE in the years ahead,” said Padley.
Padley counts DPE, which runs the largest pizza chain in Australia and New Zealand, as second in the top 10 Australian stock exchange-listed companies with the highest PE. Also in the list and their respective PE are Seek Ltd 31x, Ramsay Health Care 29x, Carsales.com 28x, Aristocrat Leisure 27X OzForex 24x, Qube Holdings 24x, CSL Ltd 24x, Boral 26x, James Hardie 24x, TPG Telecom 24, Veda Group 24x, Invocare 24x, G8 Education 24x, Brambles 23x, ResMed 22x, Aveo 22x, Cover-More Group 21x, ARB Corporation 21x, Village Roadshows 21x, Computershare 22x, Breville Group 12x, Iress Ltd 20x, Wesfarmers 20x and Virtus Health 19x.
Padley said an investor stands to make more money by buying the 10 stocks with the highest PE than the 10 lowest-PE stocks.
Angel Clark of Seeking Alpha ranked stocks listed on the American, Nasdaq and New York stock exchanges with the 100 lowest P/E ratio worth at least $10 and with a 500,000 minimum average (50-day) number of shares traded.
Clark found that the highest PE stocks significantly outperformed the lowers PE stocks four of the eight years tested, while the lowest PE stocks only outperformed in two of the eight years.
The information does not encourage buying the highest PE stocks, but to show the little correlation between low PE to long-term profitability or substantial increase in number of winners when used alone. The same principle applies to PE ratios of stocks from other bourses.
Padley and Clark’s pointers on PE as a gauge in buying or selling stocks serve to educate investors. Another online source for investor education is InvestView, a subscription-based financial education courses delivered via live webinar at www.investview.com. The courses are supported by search tools and trading indicators, weekly newsletters as well as access to live weekly Trading Rooms. InvestView also allows new retail investors to use the portal’s subscriber information on a 2-week trial period for $9.95.
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