Are these food and drink stocks sweet or sour following today’s news?

Royston Wild looks at two edible delights making the news in mid-week trade.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in pub chain Marston’s (LSE: MARS) have taken a slight hit in Wednesday trading, the stock last 2% lower despite the release of bubbly financials.

The company advised that like-for-like sales at its destination and premium divisions rose 2.3% during the 12 months to September 2016, while underlying takings at its taverns advanced 2.7% from the previous year.

And that’s not the only cause for celebration, with sales of the brewer’s own brand labels striding 13% during the period. The resurgence in ale demand in Britain shows no signs of slowing and should continue to power the top line at Marston’s, as should the company’s ongoing expansion scheme.

The chain opened 22 pubs and six lodges in fiscal 2016, and has plans to open a minimum of 22 pubs and five lodges in the new period. This seems to be a shrewd strategy as both food and drink sales continue to fly higher.

City brokers expect Marston’s to follow a 7% earnings rise in the year to September 2016 with a 4% advance in the current year, resulting in a P/E rating of 9.8 times. This is a little distance below the bargain benchmark of 10 times, and makes the pub chain irresistible value in my opinion.

On top of this, a dividend yield of 5.4% for 2017 rubber-stamps Marston’s as a grossly-undervalued share.

Grab a slice of the action

Pepperoni and pomodoro giant Domino’s Pizza (LSE: DOM) hasn’t so fared so well however, a less positive update pushing the share 4% lower from Tuesday’s close to three-month lows.

That’s not to say latest numbers from Domino’s are catastrophic. Sure, like-for-like sales growth covering the period from June 27 to September 25 may have slowed to 3.9% from 14.9% in the corresponding 2015 period.

But this is hardly a shameful performance given the colossal comparatives the fast food expert faces during the second half. Besides, these latest numbers underline the opportunities created by the massive investment Domino’s has made in its store network and digital operations.

Total UK sales strode 10.5% higher during the three months, to £220.9m, with sales from online channels rising 18.1%. More than four-fifths of all orders in the year-to-date have been made through cyberspace.

Domino’s has opened 51 new outlets so far this year, taking the total to 920. And the success of these stores has prompted the firm to hike its new store target for 2016, from 70 locations to 80. The City certainly believes that these measures should keep the top line trekking higher at a terrific rate, and analysts have pencilled-in earnings growth of 15% and 13% for this year and next.

I reckon the terrific growth trajectory at Domino’s fully justifies elevated P/E ratings of 26.4 times for 2016 and 23.5 times for 2017. Besides, dividend yields of 2.4% and 2.6% for 2016 and 2017 respectively may not be the highest out there but they help take the edge off these heady multiples.

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 shares mentioned. 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »