There are many names on the Internet FTSE250. However, there may be a disconnect between our perception of how well a company is doing and the performance of its stock. For example, I was amazed when I saw this Pizzeria Domino Group (LSE:DOM) is down 49% over the last year. Here’s what’s happening.

Causes of the fall

Upon further investigation, the stock price was struggling for several reasons. Part of this is simply due to weaker consumer demand. He addressed this in slow summer, with CEO Andrew Rennie remarking: “there is no escaping the fact that the market has become more difficult for both us and our franchisees.”

In addition, there were headaches due to higher costs, especially labor. Recent changes in the UK, including higher National Insurance contributions and similar measures, have not helped.

These two factors, along with others, negatively impact financial results. At the beginning of the year, it lowered its full-year core earnings forecasts, causing the share price to fall to adjust to revised expectations.

Perspective from here

The company’s stock is currently at its lowest level in over a decade. However, there are some signs that the worst of autumn may be coming to an end. Its latest earnings call earlier this month said underlying earnings for the full year were expected to be between £130m and £140m. So despite the problems, the company continues to generate profits.

New initiatives are being implemented. For example, a novel chicken-focused sub-brand is being trialled in hundreds of stores across the UK. If the company manages to diversify beyond just pizza, it could provide a buffer for its finances. If this can be provided at a lower price, it could retain customers who might not normally afford to order from Domino’s.

However, there are clearly many warning signs. Net debt is expected to be between £280m and £300m by the end of this year. This is up from £265.5 million in December 2024 and £232.8 million a year earlier. Interest costs on this higher debt will become even more severe and will take more cash flow away from operations.

Beyond that, I’m not sure we’re in for an uncomplicated ride with discretionary spending in the coming year. Next week’s budget will likely include higher taxes. So I think the tender demand for Domino’s may continue or at least not improve significantly.

Cutting it up

I’m really surprised that the share price has dropped so much over the last year. But after some research it makes sense. I don’t see any risk of the company going bankrupt, but I don’t see a clear catalyst to justify the purchase at the moment. As a result, I’m going to add it to my watchlist and if it continues to drop in Q1, I’ll consider purchasing it as a value buy.