One penny stock that’s caught my eye recently is DP Poland (LSE: DPP). It operates the Domino’s Pizza chain in Poland and Croatia.

Is it worth buying a few shares for my Stocks and Shares ISA portfolio at the current price of 11p? Let’s discuss.

The bull case

There are several reasons this stock’s caught my attention. One’s that the company’s revenues are surging right now.

For the first half of 2024, group revenue came in at £26.4m, up a whopping 26% year on year. And this was despite the planned closure of five stores during the period. So clearly demand for the company’s pizzas is high at the moment.

Another is that the group’s engaged in an aggressive store rollout. In Poland, seven stores have already opened this year and nine additional ones are on track to be completed by the end of 2024. Meanwhile, in the long term, DP Poland plans to open hundreds more stores across Poland and Croatia (it has 111 now). So we could be looking at a huge long-term growth story here.

Additionally, the company’s pivoting to a franchise model. These can be very profitable for businesses as the franchisor typically receives both an initial start-up fee and annual licensing fees from franchisees. It’s worth noting here that Domino’s Pizza in the UK operates a franchise model. And this company’s been an incredible investment in the long run, turning £2k into nearly £40k over the last 20 years.

Finally, management appears to be very confident about the future. “I remain very optimistic about the outlook and excited by our prospects. The Group continues to demonstrate what can be achieved in its owned stores, and the planned transition to a franchisee model will accelerate growth and increase return on capital,” said CEO Nils Gornall (who has more than 30 years’ experience with Domino’s) in the company’s H1 results.

Overall, the company appears to have a lot going for it from an investment perspective.

The bear case

Of course, there are a few risks here. For a start, the group isn’t making any money at the moment. For the first half of 2024, it generated a loss of £496m. Generally speaking, I tend to steer clear of loss-making companies when investing as their share prices can be very volatile. However, losses here are coming down (the loss in H1 2023 was £1,592m).

Another risk is that the company could have to raise capital in the future (because it’s not making any money). Earlier this year, it raised about £20m to accelerate its growth strategy. If it was to raise capital again, its share price would most likely fall. That’s because existing investors’ holdings would be diluted.

It’s also worth noting that consumers’ tastes and preferences could change in the future. Today, a lot of people love Domino’s pizza. But as healthy food becomes more of a focus, the company’s products could lose their appeal. Consumers could also shift towards artisan pizzas.

Should I buy?

Weighing everything up, I’m going to keep DP Poland shares on my watchlist for now. I could be tempted to buy this penny stock in the future, but given the lack of profitability, there are a few other stocks I see as more attractive.