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• #Dominos stock valuation driver

#Dominos stock valuation driver

For potential franchisees, the company offers a streamlined operating model, national marketing campaigns, and a cash-on-cash return of investment in three years or less.Ĭlearly the opportunity is attractive to franchisees globally because the international market has been the main driver of store growth. This franchise model is beneficial to investors because it enables the company to efficiently manage its capital while having the flexibility to pursue strong growth opportunities. Dominos is more of a supply chain operator and consumer marketing firm than it is a restaurant chain. The company generates revenue from franchise royalties and its supply chain operations in the United States.

Sources: New Constructs, LLC and company filingsįranchise Model Drives Store Count Growthĭomino’s is thought of as a restaurant chain, but the company owns just 2% of its stores. For more details about the upside embedded in Domino’s stock price, see the scenarios analyzed using our reverse discounted cash flow (DCF) model in the valuation section.įigure 1: Stock Price and Economic Book Value per Share: 2013 – Current See Figure 1.Ī PEBV ratio of 0.9 means the stock is priced for profits to immediately fall and permanently stay 10% below 2021 levels, which as we’ll show below, is highly unlikely. Then, as traders unwound their pandemic trades, the stock has tumbled 30% year-to-date and now trades below its price-to-economic book value ( PEBV) ratio (0.9) for just the second time since 2013. Like many companies that grew sales during the pandemic, Domino’s Pizza’s stock price soared ~50% above pre-pandemic levels. valuation implies the company’s profits will permanently fall 10% from current levels.ability to overcome current labor shortages over the long term.efficiencies from its integrated delivery system that third parties cannot replicate.position as the world’s largest pizza chain.said on the call, according to a FactSet transcript.ĭomino’s shares retreated on Friday, down 0.3%.Learn more about the best fundamental researchĭomino’s stock presents quality risk/reward given the company’s: “t does appear to us that while we see continued headwinds in delivery that are difficult to forecast, aggregator pressure appeared to level off on our delivery orders in Q4, while carry-out traffic was outstanding during the quarter as our strategy to grow that business continues to pay off,” said Domino’s Chief Executive Richard Allison Jr. RBC rates Domino’s stock outperform with a $400 price target up from $337.ĭon’t miss: Dunkin’s average ticket nearly doubles when customers add Beyond Meat sandwich “With sequential improvement in Domino’s delivery trends in the fourth quarter supporting the narrative of aggregator headwinds potentially plateauing, we see the stage set for top-line improvement in 2020 on continued carry-out strength and innovation,” analyst Christopher Carril wrote. RBC Capital Markets are less wary about what the future looks like. “We view Domino’s financial model as among the most compelling in the publicly-traded restaurants universe,” analysts wrote. “Strategically, we believe in the company’s course, operationally, they may again be separating from their peers but, on a valuation basis, we do not feel comfortable chasing the shares up there.” In the days leading up the earnings report, shares were in the $242 range. Shares closed at $253.48 the day third-quarter earnings were announced, Oct. “Since shares had their bottom, following the Q3 2019 release… they have outperformed the market by ~40 basis percentage points, leaving long-leaning shareholders victorious all the way home,” MKM’s Brett Levy wrote in a note. MKM Partners analysts admit that they “clearly missed the forest for the trees” on Domino’s with their neutral stock rating. Read: Molson Coors is jumping into the hard seltzer category with Vizzy launch in March Stifel raised its price target to $365 from $325. “We would consider becoming more constructive on pullbacks to the low-to-mid-$300 range.

“Although we remain highly confident in the near- and long-term growth outlook for the company, we believe the expectations likely embedded in the current price create a less compelling risk/reward setup,” Stifel wrote.