Investors are evaluating potential additions to their portfolios with a keen eye on shares from three key companies: Domino’s Pizza Enterprises Ltd, Orica Ltd, and Xero Ltd. According to investment broker Morgans, each of these companies presents distinct opportunities and challenges for shareholders.
Domino’s Pizza Enterprises: Positive Outlook Amid Pricing Strategy Shift
Morgans maintains a positive stance on Domino’s Pizza Enterprises Ltd (ASX: DMP), despite a recent rebound in its share price. Following the company’s annual general meeting update, the broker retained its buy rating and established a price target of $25.00 for its shares. The report highlighted that DMP is on track to exceed consensus net profit after tax (NPAT) for FY26, and improvements in cost management and gearing metrics are evident.
While the latest trading update indicated a decline in Same-Store Sales (SSS) growth, Morgans believes this is less significant during the company’s transition to a new pricing strategy aimed at boosting profit margins for franchisees. Notably, the share price has surged approximately 55% from its lows, driven by speculation of potential corporate activity. Despite this increase, DMP’s shares are still trading at a FY26 forecasted price-to-earnings (PE) ratio of 16x, which represents a discount of around 30% compared to competitors. With renewed confidence in the company’s turnaround plans, Morgans considers the risk-reward profile of DMP shares to be appealing.
Orica: Strong Performance and Upgraded Growth Targets
Orica Ltd (ASX: ORI), a leading provider of commercial explosives, has also received a favorable review from Morgans. The broker has placed a buy rating on Orica shares with a target price of $28.00. Following the release of its full-year results, Morgans noted that Orica’s performance slightly exceeded market expectations, showcasing robust earnings and cash flow growth, along with improved margins.
Morgans pointed out that Orica’s strong balance sheet allows for increased capital management initiatives that benefit shareholders. The outlook for FY26 appears positive, with the company targeting further growth, particularly in Digital Solutions and Specialty Mining Chemicals. The management’s increased medium-term growth targets and enhanced return on net assets (RONA) demonstrate Orica’s commitment to leveraging favorable industry fundamentals and maintaining market leadership.
Xero: Cautious Approach Amid Higher Investment Costs
In contrast, Morgans has taken a more cautious view on Xero Ltd (ASX: XRO), a cloud accounting platform provider, retaining its accumulate rating but reducing the price target to $141.00. The broker anticipates higher investment expenses in the second half of the fiscal year and suggests it may take time for Xero to prove the value of its recent acquisition of Melio to investors.
Morgans indicated that Xero’s first half of FY26 results were largely in line with expectations, but adjustments to EBITDA and free cash flow forecasts were necessary due to the anticipated costs associated with the Melio integration. The updated target price reflects a 30% decrease, influenced by lower peer multiples and reduced free cash flow per share. The firm noted that it could take some time for management to rebuild investor confidence in Xero’s growth trajectory.
As investors consider their next moves, the insights from Morgans provide a detailed perspective on the current landscape of these ASX 200 shares. With varying outlooks for each company, investors are encouraged to weigh these recommendations carefully.
In the ever-evolving market, insights from experts like Scott Phillips, who has a history of successful stock recommendations, may also guide investors in making informed decisions about their next investments.
