This week I assess the effect of Domino's Pizza's expansion strategy on existing franchisees and overall profitability. I also run the rule over Whitbread and Stobart Group.
Domino's Pizza (DOM) retains many of the financial characteristics of a quality company. It has high profit margins, high ROCE (return on capital employed) and good cash conversion. The share price performance over the past year demonstrates, however, that the business hasn't convinced investors that its growth prospects are robust enough.
With Costa Coffee in the process of being sold, much of the fortunes of Whitbread (WTB) rest with its budget hotel chain, Premier Inn. With Costa no longer included within headline results, this week's half-year figures are a decent opportunity to weigh up Premier Inn on a standalone basis.
The word 'Ebitda' (earnings before interest, tax, depreciation and amortization) was plastered all over Stobart Group's (STOB) half-year results statement. Given this business is asset intensive, and has significant depreciation expenses and replacement capex requirements, this is a red flag and a signal to undertake careful analysis of the business.
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