Domino's Pizza - Served Too Hot

| About: Domino's Pizza, (DPZ)

One of the largest gainers over the last week was Domino's Pizza (NYSE:DPZ). The company's shares returned a gain of 14% after releasing a set of strong fourth quarter results for 2011.

Fourth quarter results
Domino's pizza reported earnings per share of $0.52 for the final quarter of 2011, up 30% year-on-year which comfortably beat the consensus estimate of $0.49
Revenues rose 4.6% on a yearly basis to $502 million, a little short of estimates of $506 million.
Domino's expects US same store sales growth in the range of 1-3% per year, international same store sales are expected to grow around 3-6%
On top of that the company expects to open between 350 and 450 new stores this year.

Domino's is at the height of its economic cycle. Over the last past eight years revenues have grown from $1.45 billion to $1.65 billion, some 1.5% per annum. Net margins peaked at 7.4% in 2006 which coincided with a peak in the stock price. During the recession years of 2007 and 2008 margins collapsed to lows of 2.6% as revenues dropped in those years.
In the last two years, revenue growth has accelerated again and with that margins have expanded and stabilized at high levels. At this point in time shares are valued at 22 times earnings and 1.3 times sales.

Investment thesis
Shares have already moved from lows of $5 in 2009 to $38 at the moment which is a new all time high. At 22 times earnings with margins at their peak, shares are "fully" valued. Despite vast international growth opportunities I don't see enough triggers to spur further returns in the near term future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.