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Domino's Pizza Inc DPZ

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Domino's Shares Don't Look Tasty, but Results Impress; Raising Our Fair Value Estimate

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Wide-moat Domino's posted impressive first-quarter results, with midteens system sales growth (15% in the U.S. and 18% abroad) driving a modest earnings beat. While the market response was initially tepid, we believe that April 29's subsequent rally (up about 2%) more accurately reflects the firm's underlying strength, with strong net unit openings, volume retention in markets where dine-in restrictions have softened, and stable service times (despite labor market tightness) representing a pleasant surprise for investors. Though we plan to raise our fair value estimate to $350 per share from $340, we believe the shares look rich, trading at roughly an 18% premium to our updated valuation.

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Company Profile

Business Description

Domino’s Pizza Inc. is a restaurant operator and franchisor, with a footprint of more than 17,800 stores across 90 countries. The firm generates revenue through the sales of pizza, wings, salads, and sandwiches at company-owned stores, through royalty and marketing contributions from franchise-operated stores, and through its network of 26 dough manufacturing and supply chain facilities which centralize purchasing, preparation, and last-mile delivery for more than 6,800 units in the U.S. and Canada. With roughly $16 billion in 2020 system sales, Domino’s is the largest player in the global pizza market, ahead of Pizza Hut, Papa John’s, and Little Caesars.

30 Frank Lloyd Wright Drive
Ann Arbor, MI, 48105
T +1 734 930-3030
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Mar 31, 2021
Fiscal Year End Jan 2, 2022
Stock Type Cyclical
Employees 14,400