DPZ Market Research & Analysis Report
Updated Nov 5, 2014

Growth and Balance Sheet

Domino's Pizza Inc. (DPZ) reported third-quarter net income of $35.6 million. On a per-share basis, the Michigan-based company said it had profit of 63 cents. Revenue rose 10.5 percent to $446.6 million after sales at stores open at least one year at domestic and international shops increased more than expected. Analysts expected $436.2 million. Net income rose to $35.6 million, or 63 cents per share, in the third quarter ended Sept. 7 from $30.6 million, or 53 cents per share, a year earlier. Domino's had 5,016 domestic outlets and 6,265 international stores at the end of the quarter. Domino’s is enticing consumers with offers such as two pizzas for $5.99 each, providing a low-cost option for Americans struggling with stagnant wage growth. Domino’s also is rolling out new menu items and a “pizza theater” that lets customers see how their food is prepared.

Valuation

DPZ PE stands at 33.29 above the industry average of 29.66, and above the S&P 500 average of 17.65.  The company is currently trading above the preferable P/E ratio of 15x. DPZ current Price/Sales of 2.66 is above the average of its industry, of 1.84.  The beta of 1.24 implies higher volatility of the stock with respect to the S&P 500. DPZ has shown positive earnings consistency over the last five years. DPZ’s earnings per share over the last five years have increased by 21.77%. The current quarter earnings in comparison to the same quarter last year have increased by 18.87% which is above the required level of 15%.  DPZ’s head to head comparison to its main competitor shows that the company has a gross margin below the average of its main peers, and one that is above the industry average. The operating margin is above the average of the selected peers and the industry. DPZ’s twelve trailing months EBITDA is $363.97 million, above the industry average. DPZ’s intrinsic value is $99.29 the current price is $90.25, the stock trades below its intrinsic value. DPZ’s current price levels are above the preferable level is at the 52 week high of $90.37, and the technical indicators are bullish. DPZ has a dividend payout ratio of 34% and trailing annual dividend yield of 1.10%.

About DPZ

Domino’s Pizza, Inc., through its subsidiaries, operates as a pizza delivery company in the United States and internationally. The company operates in three segments: Domestic Stores, Domestic Supply Chain, and International. It offers pizzas under the Domino’s Pizza brand name through company-owned and franchised Domino’s Pizza stores. As of October 14, 2014, the company operated approximately 11,250 stores in approximately 75 international markets. Domino’s Pizza, Inc. was founded in 1960 and is based in Ann Arbor, Michigan.

Competitor Comparison

Domino's Pizza, Inc. N.V.

Highlights

As of January 1, 2012, its 4,513 domestic franchise stores were owned and operated by its 1,077 domestic franchisees. The Company competes with Pizza Hut, Papa John’s and Little Caesars Pizza. [Πλαίσιο κειμένου: 1Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading recommendations on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.] The stock closed yesterday’s trading session at $90.25. In the past year, the stock has hit a 52-week low of $66.18 and 52-week high of $90.37. DPZ has a market cap of $4.97 billion and is part of the services sector.

Strong brand name 

Online food ordering

Customers   can design the pizza they want

Product price is too high    

Menu is similar to other pizza restaurants   

Delivery service has limited coverage area  

DPZ Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. DPZ's 52 week high is $90.37 current price is $90.25, is at the 52 week high.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 33.29 above the average industry P/E ratio of 29.66 and is above the S&P 500 P/E ratio of 17.65.

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 2.00% of DPZ stock. Management's representation is not large enough. This does not satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

DPZ is trading in the range of $76.00 - $90.37 in the past 30 days. The stock has been showing support at $83.70 and resistance in the $94.90 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 82.93. Our indicators give a bullish view on DPZ.

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 4 Buy, 3 Outperform, 7 Hold, 1 Underperform and 0 Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. DPZ’s annual EPS for the last 5 years were 1.38, 1.45, 1.71, 1.90, 2.48 this type of earnings action is positive.

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry. DPZ’s total debt/equity ratio is not available.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. DPZ’s EPS growth for this quarter relative to the same quarter a year earlier is 18.87%, above our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. DPZ’s annual earnings growth rate over the past five years is 21.77%, above the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.