9/1/2023 0 Comments Dominos stock valuationThus, I don’t think the numbers will be that good. The macro-data in the restaurant industry hasn’t been the best lately, and Domino’s search interest trends appear to have flattened out in early 2018. As such, the stock looks particularly susceptible to any bad news, and bad news could come in the form of worse-than-expected quarterly numbers. Bottom Line on Domino’s StockĭPZ stock is overvalued here, considering the rising threat of competition in the digital food ordering and delivery market. Discounted back by 10% per year, that equates to a present value of just under $200. After $100 million in interest expense and 25% for taxes, and on a presumably reduced share count of 40 million, that equates to roughly $15 in earnings per share in five years.Ī market-average growth multiple of 19-times forward earnings on those $15 earnings implies a four-year forward price target of $285. A 20% operating margin implies operating profits of $900 million. Revenue growth of 10% per year puts revenues at $4.5 billion in five years. Over the next several years, this rate of growth will likely persist, and I think 20% operating margins are a reasonable target in five years. Over the past several years, operating margins have gone from 17.4% to 18.7%. ![]() Operating margins continue to grind higher, thanks to improved efficiency and scale. Slower comparable sales growth in the low- to mid-single digit range plus global unit expansion should drive somewhere around 10% revenue growth per year over the next five years. Over the past three years, same-store sales growth has trended from 12% to 10.5% to 7.7%.Įlevated competition ensures that this trend will continue. This erosion in growth rates is already happening. And, of course, DPZ does make really tasty pizza.īut, elevated competition in the digital food ordering and delivery game will inevitably erode DPZ’s growth rates over the next several years. The company is also continually improving its online food ordering and delivery technology to be one step ahead of the competition. There really isn’t any global leader in the fast pizza market, and as such, DPZ does have a clearly pathway to global domination of the fast pizza market. Plus, the company has a tremendous global growth narrative through unit expansion. Domino’s will still be a winner in the at-home shift. Growth at DPZ won’t entirely go away because of this elevated competition. Thus, DPZ is no longer the only or go-to option. Thanks to the mainstream emergence of food ordering and delivery apps like GrubHub Inc (NYSE: GRUB), Uber Eats, and Postmates, consumers can now order food from essentially any restaurant and have it delivered to their doorsteps. Thus, DPZ’s business model was naturally levered to succeed in the at-home economy, and as a result, Domino’s was the first to arrive at the online food-ordering-and-delivery party.īut that party is now becoming crowded. Rather, I’m a seller.ĭomino Stock’s Growth Drivers Will Be Dilutedĭomino’s has been a big winner in the at-home economy because pizza is the exact type of food that was made to be ordered online and delivered to your doorstep. Plus, this quarter’s numbers might not live up to expectations, and that could be disastrous for the richly valued Domino’sstock.Īll in all, I’m not a buyer of Domino’s stock at these levels. (NADAQ: AMZN), and ordering pizza to eat at home.Īs such, DPZ has been a big winner over the past several years.īut at current levels, the valuation on Domino’s stock appears to have sprinted ahead of fundamentals. Instead of going out to the movies, shopping at malls and eating out, consumers are now watching movies on Netflix, shopping on, Inc. Why is there such a strong correlation between these two stocks? Because they both fit in perfectly with the at-home economy trend that is growing rapidly. ![]() Granted, NFLX stock has outperformed DPZ stock (+300% for NFLX versus +140% for DPZ), but both are still big winners. Take a look at the stock charts of Netflix and Domino’s Pizza, Inc. (NYSE: DPZ) over the past three years. ![]() The real trend that is sweeping America - and the rest of the world - is “Netflix and chew.” (NASDAQ: NFLX) has risen to the forefront of American entertainment, the kids have popularized the phrase “Netflix and chill.” But forget about that.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |