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DPZ Stock Study (11-10-25)

Posted by on March 13, 2025 at 07:24 | Last modified: November 10, 2025 09:06

I recently did a stock study on Domino’s Pizza Inc. (DPZ, $410.18). The previouis study is here.

M* writes:

     > Domino’s is a restaurant operator and franchiser with over
     > 21,500 global stores across more than 90 international markets
     > at the end of the second quarter of 2025. The firm generates
     > revenue through the sales of pizza, wings, salads, sandwiches,
     > and desserts at company-owned stores, royalty and marketing
     > contributions from franchise-operated stores, and its network
     > of 25 domestic (and five Canadian) dough manufacturing and
     > supply chain facilities, which centralize purchasing, preparation,
     > and last-mile delivery for the firm’s US and Canadian
     > restaurants. With roughly $19.2 billion in 2024 system sales,
     > Domino’s is the largest player in the global pizza market,
     > ahead of Pizza Hut, Little Caesars, and Papa John’s.

Over the past decade, the medium-size company has grown sales and earnings at annualized rates of 9.0% and 18.7%, respectively. Lines are mostly up, straight, and parallel except for sales dip in ’23 and EPS dip in ’22. Five-year EPS R^2 is 0.75 and Value Line (VL) gives an Earnings Predictability score of 95.

Over the past decade, PTPM lags the industry but leads peers while ranging from 12.5% in ’18 to 15.3% in ’24 with a last-5-year mean of 14.1%. ROE leads the industry but lags peers while ranging from d15.2% in ’20 to d9.0% in ’17 with a last-5-year mean of d12.8% [negative due to long history of using debt to buy back shares therefore resulting in shareholders’ deficit]. Debt-to-Capital soars above peer and industry averages while ranging from 412% in ’20 to 754% in ’17 with a last-5-year mean of 455%.

Quick Ratio is 0.77 and Interest Coverage 4.9 per M* who assigns “Wide” Economic Moat, gives “Exemplary” rating for Capital Allocation [puzzling since analyst note describes balance sheet as average with large debt load in addition to having mixed view on shareholder distributions due to history of buying back stock for inflated prices], and a B grade for Financial Health (per BI website). VL gives a B grade for Financial Strength.

With regard to sales growth:

I am forecasting toward lower end of the range.

With regard to EPS growth:

I am forecasting below the long-term-estimate range (mean of seven: 10.8%). Initial value is ’24 EPS of $16.69/share rather than 2025 Q3 EPS of $17.11 (annualized).

My Forecast High P/E is 26.0. Over the past 10 years, high P/E ranges from 28.4 in ’23 to 45.1 in ’22 with a last-5-year mean of 36.6 and a last-5-year-mean average P/E of 29.6. I am below the range.

My Forecast Low P/E is 19.0. Over the past 10 years, low P/E ranges from 19.5 in ’23 to 26.8 in ’15 and ’17 with a last-5-year mean of 22.5. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $317.10 is default based on initial value given above. That is 22.7% less than the previous close and 19.3% less than the 52-week low.

Over the past 10 years, Payout Ratio (PR) ranges from 25.2% in ’20 to 36.2% in ’24 with a last-5-year average of 31.5%. I am forecasting below the range at 25.0%.

These inputs land DPZ in the HOLD zone with an U/D ratio of 2.1. Total Annualized Return (TAR) is 9.2%.

PAR (using Forecast Average–not High–P/E) of 6.2% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can focus on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 22 studies done in the past 90 days (10 outliers including my study excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 5.7%, 9.0%, 29.9, 20.8, and 31.1%. Although sample size is too small for a valid comparison, I am lower across the board. VL projects a future average annual P/E of 25.0: less than MS (25.4) but greater than mine (22.5).

MS high / low EPS are $26.50 / $17.06 versus my $23.41 / $16.69 (per share). My high EPS is less due to a lower growth rate. VL’s $31.55 high EPS soars above both.

MS LSPF of $352.80 is roughly equal to the above-stated 20.8. MS LSPF is 11.3% greater than mine, however.

MOS is robust in this study because my inputs are near or below historical/analyst averages/ranges. Tiny sample size aside, MS TAR (14.8%) exceeding mine by 5.6% per year and my lower LSPF are suggestive of MOS.

With regard to valuation, PEG is 2.2 and 3.2 per Zacks and my projected P/E: somewhat overvalued (3.0 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is a bit cheap at 0.81. “Quick and dirty DCF” has stock undervalued by 20%.

Per U/D, DPZ is a BUY under $390/share. BI TAR criterion would be met [608.7 / ((13.87 / 100 ) +1 ) ^ 5] ~ $318 given a forecast high price ~$609.

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