Why Domino's Pizza and Barclays could beat the FTSE 100 after 10%+ share price falls
The share prices of Domino's(LSE: DOM) and Barclays(LSE: BARC) have disappointed of late. In the case of the former, its value declined by over 10% on Tuesday after it released interim results which showed mixed performance during the latest half year. Meanwhile, the Barclays share price has fallen by 12% since mid-May even after the bank released a relatively upbeat investor update.
Looking ahead, the two shares may remain somewhat unpopular in the short run after their recent share price falls. However, both companies appear to offer growth at a reasonable price which could help them to outperform the FTSE 100.
Mixed performance
As mentioned, the Domino's performance in the first half of the year included some positives and some negatives. In terms of the latter, pre-tax profit declined by 9.7% to £41.7m as exceptional costs took their toll. For example, it recorded £2.1m in costs related to the transformation of its Dolly Dimples acquisition, while a £1.9m charge was booked relating to its supply chain centre.
Despite this, the underlying performance of the business was strong. Group system sales increased by 12.8%, while its performance in the UK was resilient in spite of a challenging economic environment. UK system sales increased by 8.3%, with like-for-like sales growth being 5.9%.
Domino's continues to invest in its digital capabilities. It is also seeking to become an increasingly efficient business, and this could help to provide it with a competitive advantage versus peers in what remains a crowded market. Following its share price fall, the stock now trades on a price-to-earnings growth (PEG) ratio of 1.7, which suggests that it could generate high share price growth in the long run.
Improving prospects
Also offering the potential to beat the FTSE 100 is Barclays. The company's recent results showed that it is delivering on its strategy, and this could lead to an impressive growth outlook. In fact, in the next financial year, the bank is forecast to post a rise in earnings of 15%, which indicates that its strategy is working well.
Despite having a positive earnings growth outlook, the stock has a PEG ratio of just 0.6. This suggests that it could offer a wide margin of safety, with investors apparently adopting a cautious stance regarding its future outlook. This could provide new investors with the opportunity to buy at what may prove to be a low price.
A potential catalyst for the Barclays share price is its dividend growth outlook. The company is expected to deliver dividend growth of 65% per annum over the next two financial years. This puts it on a forward dividend yield of over 4%, which indicates that as well as growth and value potential, the stock could also become an impressive income share. As a result, now could be the perfect time to buy it.
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Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays and Domino's Pizza. 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.
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