The Motley Fool

Should You Buy Domino’s Pizza Group PLC, Ladbrokes PLC And Interserve plc?


Today’s results from Domino’s (LSE: DOM) showed that the company continues to make impressive progress, with underlying profit rising by 15% versus last year. In addition, like-for-like sales growth of 9.5% in the first eight weeks of 2015 should also give investors in the company a degree of confidence in the future performance of the fast-food business, with its focus on mobile orders allowing it to stay one step ahead of rivals.

Looking ahead, Domino’s has considerable potential. This is best evidenced by its earnings forecasts, with Domino’s expected to post bottom line growth of 14% in the current year, followed by a rise of 13% next year. Both of these figures are around twice the expected growth rate of the FTSE 100 and, despite this, Domino’s trades on a valuation multiple that seems very reasonable. For example, it has a price to earnings growth (PEG) ratio of 1.5, which indicates that its share price could continue to move higher, having jumped by as much as 8% following today’s results.

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On the face of its, results released today from Ladbrokes (LSE: LAD) were very disappointing. For example, the betting company is to close 60 unprofitable stores, as its headline pre-tax profit declined by 13.5% to £98m. And, with this being the third year in a row of profit falls, Ladbrokes may appear to be a stock to avoid – especially when 2015 is expected to get even worse for the company, with a 19% fall in profit pencilled in.

However, for long term investors, Ladbrokes could offer good value at the present time and, as such, its shares are up 7% today. That’s because it is expected to increase earnings by 14% next year, which puts it on a PEG ratio of just 1. Furthermore, while dividends may come under pressure from 2016 onwards (Ladbrokes has today committed to maintaining the dividend at its present level for 2015), Ladbrokes currently yields a very enticing 7.4%, which makes it an appealing income stock.

So, with a mix of good value, a very high yield and growth potential next year, Ladbrokes could be a rewarding, albeit risky, investment for the long run.


Results released today from support services company, Interserve (LSE: IRV), show that it is making encouraging progress and, as such, its shares have risen by 6% at the time of writing – even though its Chairman has today announced his intention to step down in 2016.

For example, revenue is 33% up on the prior year, with net profit increasing by a very impressive 23% as Interserve continued to benefit from recent acquisitions. However, even excluding the effect of acquisitions such as Initial Facilities and the Employment and Skills Group, Interserve still delivered bottom line growth of 14%, which bodes well for its long term future.

And, with the company being forecast to increase its net profit by 7% this year and 11% next year, its current price to earnings (P/E) ratio of 9.4 seems to be unjustifiably low. Furthermore, Interserve yields a very enticing 4.1% from a dividend that is covered 2.6 times by profit. As such, it appears to be a bargain buy at the present time.

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Peter Stephens owns shares of Interserve. The Motley Fool UK has recommended Domino's Pizza. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.