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Dominio's Pizza Is Still Worth Holding At Its All-Time Highs

Apr. 10, 2018 12:45 PM ETDomino's Pizza, Inc. (DPZ)1 Comment
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Kenra Investors


  • Domino's pizza has doubled sales and tripled EBIT in the past ten years.
  • Further market share gains, international expansion and the secular growth of the delivery industry will continue to lift the business.
  • DPZ is still a stock worth holding assuming we continue to monitor some underlying trends.

Domino’s Pizza (NYSE:DPZ) was able to deliver the performance of a high-tech growth company in a sector that is usually considered mature by everybody, and which is actually mature if we focus on the overall sales growth. Revenue and EBIT have been in a strong uptrend for years and have basically doubled and tripled respectively, since the bottom reached in 2009:

Source: sentieo.com

As a result, the company’s shares have delivered a 20% compound annual return since then. Driven by the increasing penetration and market share growth at the expense of more fragmented players even in a market that shows flattish growth, the stock’s EPS multiples have expanded to the 40-45 area, before contracting a bit in recent times as a result of the slower, albeit still excellent, growth rates reported in Q4.

Source: sentieo.com

DPZ’s longer-term growth rate still assumes a 3% to 6% comps growth and a total 8% to 12% sales growth, and while the company’s top line growth fell to single-digit territory in Q4 for the first time in two years (+8.8%), the management still has a very optimistic view about Domino’s growth prospects:

And certainly, they've been outperforming anybody and everybody since the beginning of the decade, but that doesn't mean that we're not going to continue to try to hit the 3% to 6% comp range and, ultimately, the 8% to 12% global retail sales metric that we gave you for the next 3 to 5 years. We want to be balanced, but we want to try to outperform that as well, if we can, of course, right? There is no [governor] on the business. We're not at capacity or anything like that. So we can continue to grow, I think, as fast as we can grow. It's just up to us to execute.

This article was written by

Kenra Investors profile picture
Kenra investors is a 5-star financial expert according to Tipranks and is constantly in the top 5%-10% of world financial experts.Thanks to the experience gained in almost 10 years of activity and study in the stock market and 5 years in professional equity research, I have developed a very sound understanding of many aspects of business, finance and investing. My approach is based on combining fundamental, technicals and macro to deliver meaningful outperformance. I am always open to considering professional collaborations or formal employment opportunities in equity research and/or portfolio management globally. For any purpose, you can message me here on Seeking Alpha or send an email to kenrainv@gmail.com

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