Yahoo Finance Here's why the Domino's Pizza share price (LON:DOM) could rerate
Stockopedia’s ‘High Flyers’ are the stock market superstars. These companies tend to be the ones that fund managers jostle and barter over. They are high quality, growing stocks with a history of beating estimates - and Domino's Pizza (LON:DOM)is one of them.
Domino's Pizza is a mid cap stock in the Restaurants & Bars industry. When we analyse Domino's Pizza from a factor perspective, we find that it has a Quality Rank of 97, a Momentum Rank of 68, but a Value Rank of only 38. This is the classic factor profile of a High Flyer.
A combination of high quality, high momentum and low value is great when earnings go up but a bad place to be when things go wrong. Momentum works both ways, so caution is required when dealing with High Flyers.
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What kind of High Flying stock is LON:DOM?
So, High Flyers tend to be riskier and more volatile than the market average. But is this true of Domino's Pizza?
We can find out quickly by applying Stockopedia’s RiskRatings system, which splits the stock market into five buckets according to stock price volatility. The five classifications (from least to most volatile) are:
Conservative (10% of the market)
Balanced (15% of the market)
Adventurous (20% of the market)
Speculative (25% of the market)
Highly Speculative (30% of the market)
Domino's Pizza is an adventurous stock. This means that the group is in the more volatile half of the market in terms of stock price volatility, as might be expected of a High Flyer. Those looking to invest here should prepare themselves for a potentially bumpy ride. The downside of above-average volatility can be seen in Domino's Pizza negative one-year relative strength of -13.2%.
On the other hand, we can see from Domino's Pizza’s above average five-year return on capital employed figure of 48.3% that the group has been highly profitable over multiple years. This suggests that Domino's Pizza can back up its favourable factor exposures and volatility characteristics with some kind of economic moat.
Find the rockstars of the stock market
High Flyers are great stocks to have in your portfolio if you think you need more momentum or quality - just look out for signs that momentum might be changing. If you want to see which other stocks qualify as High Flyers, you can find a comprehensive list on Stockopedia's StockRanks page.
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