The market is starting to show some mixed signals. The effects of above-average inflation over the past few years has hit a number of sectors hard. Investors are now learning that fast food may still be fast, but with soaring food prices it may not be cheap.
However, there remain some opportunities in the restaurant industry. Particularly for companies that can keep costs down, consumers happy, and already have a reputation for beating the market.
Pizza giant Domino’s (DPZ) just beat on earnings and revenues. The pizza chain’s focus on quality in the 2010s made it one of the market’s best-performing stocks. Shares are up over 60% in the past year.
That trend is still underway today, and strong orders, both carryout and delivery, indicate that they’re still priced right for the dining experience they provide.
While shares look pricey at 30 times earnings, the company’s growing earnings are closing in on that rate.
Action to take: Investors may like shares here, or on any down day for shares. Besides strong earnings and sales right now, Domino’s has been rewarding investors with a growing dividend. Shares now yield 1.2%.
For traders, the uptrend is likely to continue. The June $550 calls, last trading for about $8.50, could see mid-double-digit returns on a further rally in Dominos shares in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.