Domino's Pizza: Great-Value Pizza, Great-Value Stock

Dec. 25, 2020 8:09 AM ETDomino's Pizza, Inc. (DPZ)43 Comments
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StockBros Research


  • Domino's Pizza is worth over $500 a share based on our DCF analysis.
  • The company runs a fairly predictable business, allowing for peace of mind and steady returns.
  • The stock dropped in October due to temporary headwinds caused by COVID-19 and cheese prices, but we believe this is temporary and that the technicals suggest a potential bullish reversal.


Domino's Pizza, Inc. (NYSE:DPZ) is a stable and predictable pizza-industry leader with a great long-term track record. The pizza industry is fragmented which means that the company's size and brand recognition provide it with a competitive edge over the majority of its rivals. Domino's will continue to see strong growth going forward which will be fueled by their ambition to continue opening many more stores. We believe DPZ is worth over $500 a share, making the stock undervalued.

What We Like About Domino's

Domino's is a leader in the QSR pizza industry with consistent growth and fairly predictable operating income. It has proven to be a winner during COVID-19 with same-store sales and operating income both increasing year over year. Its success can be attributed to the low CapEx, delivery & carry-out business model. The company has only a minor focus on dine-in experiences which is exactly why it did well throughout the pandemic. In addition, it has a very strong e-commerce presence with over 70% of U.S. sales coming from digital channels.

DPZ's continuous focus on innovation has allowed the company to develop proprietary POS systems and new delivery methods with the aim of making the digital experience as frictionless as possible for the customer. This approach is clearly working well as the company has been able to accumulate over 25 million users for its loyalty program (us at StockBros included).

Moreover, in the last 4 quarters, the company has almost doubled its cash position to $330 million while maintaining debt at approximately $4.1 billion. We like the fact that Domino's can maintain a fairly high leverage ratio of approximately 6 times EBITDA. Its strong operating profits allow the company to achieve an interest coverage ratio of 4.14x which equates to a synthetic bond rating of A3/A-.


This article was written by

StockBros Research profile picture
Two bros that talk about stocks, mainly GARP (growth at a reasonable price) stocks, but we look for opportunities everywhere. We don't have a specified time horizon. We invest in a stock for as long as our thesis holds true, and get out when the facts change. In addition, we've developed market-beating algorithms with python that help us find attractive investment opportunities within our own portfolios.Website: www.stockbrosresearch.comTwitter: @StockBrosTrades

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in DPZ over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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