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These 2 rapid growth stocks are flying again. Should you hop on board?

Fancy sinking your teeth into a top income and growth stock that has cooled lately but could be set to deliver the goods again? Then it’s worth taking a look at Domino’s Pizza Group (LSE: DOM).

Franchise fun

The pizza and pasta delivery franchise is up more than 6% this morning after reporting a 12.6% rise in group statutory revenue to £534.3m in its full-year 2018 preliminaries. Despite that tasty topping, the base line case was a bit soggy. 

Group underlying profits before tax fell 1.1% to £93.4m, which excludes non-underlying charges of £31.5m relating mainly to international impairments, UK supply chain transformation and integration costs. Throw those into the mix and group statutory profits fell 24% to £61.9m.

Growing pains

CEO David Wild admitted that “2018 was a mixed year”. In its key UK and Ireland markets, which make up 90% of the business, the group extended its “excellent track record of growth and cash generation”, and responded well to the “challenging environment for the casual dining market”.

Its franchisees also opened 59 new stores, creating more than 2,000 jobs and sold a record 102m pizzas, although the pace of the rollouts is slowing despite it completing a new supply chain centre in Warrington. Wild also admitted to “growing pains” internationally, which hampered overall financial performance.

Going global

The £1.14bn FTSE 250 group is now has a pizza loving market of more than 100m, with “little, if any, global brand competition”, but getting there is going to take time and money, even if the international business is targeted to break even this year. Domino’s also faces a franchisee uprising, as they lobby for a greater share of profit.

Investors may be happy with a 5.6% hike in the four-year dividend, but there was no news of another share buyback even though the stock is trading at a four-year low, having fallen 28% in the past 12 months, which some boards would see as an opportunity. It now trades at 13.4 times forecast earnings.

Domino’s offers a tempting forecast yield of 4.4% with cover of 1.7, while earnings are forecast to rise 9% both this year and next. Investors are tucking into its stock today, and Royston Wild has previously hailed it a stock he’d buy and hold for the next 10 years.

Fast food fight back

Takeaway marketplace giant Just Eat (LSE: JE) has given investors a rough ride lately but is now on the comeback trail, rising 40% in the last three months.

Last week the £5.3bn company announced a 43% rise in 2018 revenues to £779.5m, with underlying EBITDA earnings up 6% to just shy of £174m. Orders and active customer numbers also grew strongly. The challenge is that its stock is priced for rapid growth, with a forecast valuation of a whopping 75 times earnings.

Tough times

Worryingly, earnings per share are forecast to drop 26%in  this calendar year as it invests heavily in the business to fight off competition from Deliveroo and Uber Eats. However, earnings are forecast to rebound 64% in 2020, so there is still a strong growth story here. 

Just Eat is a real yo-yo stock, entering the FTSE 100 in November 2017 only to drop out last December then bounce back in earlier this month. As Domino’s noted today, things are tough in the casual dining sector, but there is still an opportunity here.

Capital Gains

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Domino's Pizza and Just Eat. 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.