Which Domino’s Pizza shares should I buy?

During lockdowns, some new types of businesses boomed. But there were other enterprises that already had a good track record, whose business models seemed even better suited to the new environment. One such company is Domino’s Pizza. Its streamlined, franchised model of selling pizzas turned out to be a solid business model. That got me thinking about buying Domino’s Pizza shares for my ISA.

But the thing is – just like their toppings, there are quite a few Domino’s Pizza shares I could select from.

Domino’s Pizza shares in the US

The obvious place to start might be the New York-listed company Domino’s Pizza. This company is the global nerve centre of the Domino’s operation, with a $17bn market capitalisation. What is interesting to me is that despite its size and established business, the company keeps doing well. Last year, for example, it managed to grow revenues by 14% and earnings per share by 28%. For such a mature company, I find that incredible.

Over the past year the shares have climbed 17%, and over five years they added 177%. The company faces risks, such as market saturation hurting revenues. As a UK investor, I would also face currency risks in this dollar-denominated stock. A move in the dollar-to-sterling exchange rate could hurt my returns even if the shares perform well.

Local flavour: Domino’s Pizza UK

But wait. There are other ways I could expose my portfolio to the Domino’s growth story as a UK investor. London-listed Domino’s Pizza Group is the local franchisee in the British Isles. It formerly had operations in Scandinavia and Central Europe, but has been exiting those to refocus on its core market. That is where it has critical mass, so I think that could be good news for profitability.

The shares have performed well in the past year, adding 11%. But over five years they are up just 9%. There have been dividends along the way – the current yield is 3.2% – but that’s still not a tasty return in my view. I think its geographic retrenchment should be good for the company, though, and am bullish about its prospects. But if a UK recession cuts consumer spending, revenues and profits could shrink.

Developing markets exposure

There’s another way for me to buy Domino’s Pizza shares. I could invest in London-listed penny share DP Eurasia. Although it’s listed in London, the company has most of its 789 Domino’s shops in Turkey and Russia.

The DP Eurasia share price has soared 181% over the past year. But with a market cap of £134m, the company is a fraction of the size of the US mothership and that could exacerbate volatility. In fact, over five years, these shares have actually lost 49% of their value.

Although the shares are denominated in pounds, there is currency risk here. The Turkish lira has already lost 20% of its value this year.

My next move on Domino’s Pizza shares

Each of these Domino’s Pizza shares has different attractions and risks for me. But I like the business model and see continued growth prospects in the US and UK, so would consider adding either Domino’s Pizza or Domino’s Pizza Group to my portfolio. DP Eurasia’s heavy developing market exposure doesn’t match my risk tolerance, so for now I will sit that one out.