In our opinion, the current price level is not an ideal entry point, and there is more downside risk ahead. The firm has reduced its number of shares outstanding by over 30%.Īlthough DPZ has been consistently paying dividend and bought back a significant amount of its outstanding shares, it is trading at a significant premium compared to its peers. Share buybacksĭPZ has been committed to return value to its shareholders over the last decade. Also important to point out that DPZ's payout ratio is approximately 30%, meaning that they have more than enough resources to cover their dividends, even if cash flow growth is forecasted to slow or even decrease slightly in the short term. In the first quarter, DPZ declared a quarterly dividend of $1.1 per share.ĭomino's has a strong track record of paying and increasing its dividend, staying committed to return value to its shareholder in this form. On the other hand, DPZ could be more interesting for investors, who are looking for dividends and share buybacks. In our opinion, these price multiples are not justified, due to the above-mentioned headwinds, and also the slowing growth prospects. Further, analysts are forecasting an EPS of $12.8 on average for 2022, which is slightly lower than the EPS of $13.6 generated in 2021. The sector median revenue growth YoY has been 25.6%, almost seven times higher, while the year-over-year sector median EBITDA growth has been over 40%. In terms of revenue and EBITDA growth, 3.7% and 1.1% respectively, DPZ remains behind its peers. According to EV/EBITDA, P/S and P/CF, the firm is also trading at a significant premium compared to the sector medians. The trailing twelve-month P/E ratio of Domino's is over 25, while the sector median is about 11.5, more than 50% lower. Valuationĭomino's Pizza's stock is significantly down from its recent highs, however, the traditional price multiples still indicate that the stock is overvalued compared to the sector median. Let us take a look at the business from a valuation point of view to understand whether the business could be a good investment from a price perspective. We believe, based on the financial performance, it is not the right time to start a new position in DPZ.
#Dominos stock free#
Important to point out that DPZ has generated strong free cash flow from operations resulting in $66.3 million, but an experienced a decline in terms of its current ratio.Īll in all, we have been impressed with DPZ's growth in the last few years, but the growth seems to be coming to an end due to the current market environment. Higher interest rate expense also played a role in the decreasing net income. The firm expects these negative impacts to remain for the rest of 2022. The 16.7% drop in the EPS can be attributed to several headwinds, including the rising number of Omicron cases, labor shortages, inflation and lower income from operations. Decreasing net income and earnings per share, despite the declining number of shares outstanding also raises a red flag. Although DPZ is expanding its global footprint and same-store sales have increased slightly globally, in our view, declining same-store sales in the U.S. In case of retailers and restaurants, we like to see organic growth and increasing same-store sales. In total, DPZ has opened 213 new stores in the first quarter, 37 in the United States and 176 internationally. The growth of revenue on the international level was mainly driven by the opening of new stores and higher supply chain revenues, however, a minor growth in same-store sales also contributed.
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In the first quarter of 2022, Domino's has reported a 3.6% increase in global retail sales, while the same-store sales in the United States have fallen by about 3.6%.
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#Dominos stock drivers#
To decide whether DPZ could be a good choice for your portfolio, let us first look into the first quarter results and the main drivers behind the figures. In our view, these results are raising some concerns, and we believe that the firm is likely to continue experiencing headwinds in the rest of 2022, mainly driven by the higher input costs, labor shortages and the diminishing impact of pandemic-created trends.
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same-store sales declined by 3.6%, while diluted earnings per share fell by 16.7%. DPZ also has a strong record of growing dividend payments.Īlthough in the last quarter the firm announced a 3.6% increase in its global retail sales, the U.S. We have been a big fan of Domino's Pizza's ( NYSE: DPZ) business in recent years, as the firm has been consistently growing its revenues and net income, becoming the largest pizza company in the world, while continuously repurchasing its shares.