This FTSE 250 stock has just surged 13%! This is what I’d do now

I think this FTSE 250 stock is a brilliant buy today for growth investors. Here’s why the UK share has rocketed in price today.

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Investor appetite remains pretty flat on Tuesday as share pickers continue to ponder the impact of rising inflation on the economic recovery. The FTSE 250 for instance is only up fractionally on the day. But the Domino’s Pizza Group (LSE: DOM) share price has gone berserk following the release of full-year financials.

Domino’s is up 13%, as I type, after a positive reception to its 2020 results. At 350p per share, it’s leapt to its most expensive for three weeks. Yet, at current prices, it still looks like a bona-fide bargain, in my opinion at least, .

Here are the key points of the takeaway titan’s latest release.

Double-digit sales rises

The likes of Dominos have enjoyed a roaring trade because of Covid-19 lockdowns. With people being shuttered up in the evenings and working from home in large numbers, demand for its fast food has rocketed.

Domino’s said today that system sales rocketed 11.4% in 2020, a result which drove statutory pre-tax profit to £39.7m from £2.8m in 2019. Like-for-like sales at the FTSE 250 business rocketed 10.3% in 2020.

Free cash flow at the company increased 73% year-on-year. And this enabled net debt to drop more than £60m to a more respectable £171.8m. This has encouraged Domino’s to launch a £45m share buyback programme “effective imminently.”

Hand holding pound notes

Ambitious growth plans

Perhaps unsurprisingly, given ongoing lockdowns, Domino’s said it has “started strongly” in 2021 too. It also said it experienced “exceptional trading over the new year period as we recorded our highest ever sales week.”

The firm has painted a sunny picture looking further into the future too. It said that “[our] current trends and demand expectations, in addition to the investment in capabilities we have and are making, gives us confidence in delivering further operational and financial progress in the coming year.”

Domino’s also said that it hopes to achieve sales of between £1.6bn and £1.9bn over the medium term. And to help it meet this goal, it intends to add an extra UK 200 stores to its existing estate of more than 1,200. Other plans include expanding its drive-through service (with a view to having 450 stores offering the service by the end of June), boosting its collection business to double its market share in the UK, and making improvements to its digital operations.

A piping-hot FTSE 250 share

I think Domino’s is an excellent FTSE 250 share to buy today. The UK food delivery market is expected to keep growing at breakneck pace. And I think this particular takeaway giant has the brand power and the ambition to make the most of this sterling opportunity.

City analysts reckon annual earnings at Domino’s will keep rising too. They predict bottom-line rises of 6% and 5% in 2021 and 2022 respectively. This UK share trades on a forward price-to-earnings (P/E) ratio of 19 times. Competition is intense in the takeaway market and this may harm current earnings forecasts. Domino’s may also be hit by a surge in people choosing to eat out once Covid-19 lockdowns end too. But I still think this represents very decent value for money for growth investors.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Dominos Pizza. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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