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One penny stock that caught my eye recently DP Poland (LSE: DPP). Works for Domino’s Pizza series in Poland and Croatia.
Is it worth buying a few shares in my Stocks and Shares ISA portfolio at the current price of 11p? Let’s talk.
A case of bull
There are several reasons this stock caught my attention. One is that the company’s revenue is currently growing.
In the first half of 2024, the club’s revenue came in at £26.4m, up 26% year-on-year. And this happened despite the planned closure of five stores during this period. So clearly the need for a pizza company is up at the moment.
Another is that the group has engaged in brutal shoplifting. In Poland, seven stores have already opened this year and nine more are on track to be completed by the end of 2024. Meanwhile, in the long term, DP Poland plans to open hundreds of stores throughout Poland and Croatia (it has 111 now. ). So we can be looking at a big long-term growth story here.
In addition, the company is looking at the franchise model. This can be a huge benefit to businesses as the franchisor usually receives both an initial start-up fee and annual license fees from the franchisees. It is noteworthy here that Domino’s Pizza in the UK it uses a franchise model. And the company has been a fantastic investment over time, turning £2k into almost £40k over the last 20 years.
In the end, management seems more confident about the future. “I’m always very optimistic about the outlook and I’m excited about our prospects. The Group continues to demonstrate the potential of its stores, and the planned transition to a shareholder model will accelerate growth and increase capital returns.,” said CEO Nils Gornall (who has over 30 years experience with Domino) in the company’s H1 results.
Overall, the company seems to have a lot going for it from an investment perspective.
Bear bag
Of course, there are a few risks here. First of all, the group is not making any money at the moment. For the first half of 2024, it produced a loss of £496m. In general, I tend to stay away from loss-making companies when investing as their stock prices can fluctuate a lot. However, losses here are decreasing (losses in H1 2023 were £1,592m).
Another risk is that the company may have to raise capital in the future (because it is not making money). Earlier this year, it raised nearly £20m to accelerate its growth strategy. If money were to be raised again, the budget figure would likely decrease. This is because the funds of existing investors will be reduced.
It is also worth noting that consumer preferences and preferences may change in the future. Today, many people love Domino’s pizza. But as healthy eating becomes more of a focus, the company’s products may lose their appeal. Consumers can switch to artisan pizzas.
Should I buy?
All things considered, I’ll keep DP Poland shares on my watch list for now. I would be tempted to buy this penny stock in the future, but due to the lack of profit, there are a few other stocks that I find more attractive.
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