Wall Street analysts expect this pizza restaurant to grow at a double-digit pace for the next few years.
Domino’s Pizza (DPZ)
From Dividend Lab
Domino’s Pizza (DPZ) is one of the most recognized pizza delivery companies in the world. The company has over 13,200 stores in 80 markets, with 51% of stores located internationally in developed and emerging markets. Approximately 91% of the company’s stores are franchised.
Domino’s controls 28% of the pizza delivery market and 14% of the quick service restaurant market in the United States. Domino’s has recorded positive domestic same store sales growth in 17 out of the last 21 years, with average growth of 3% per year. The average US franchise store EBITDA has increased for seven consecutive years and is now at $125,000 per year.
Of the company’s top 15 international markets, nine are in developed countries while six are in emerging markets—with potential to add 4,200 new stores. Domino’s is ranked first or second in the pizza delivery industry in all top 15 markets giving it a solid leadership position to capture more market share.
In FY15, Domino’s recorded $4.7 billion in annual global digital sales, which accounted for over 50% of total sales for the year (compared to an average of 20% for the restaurant industry). This was a positive outcome of management’s turnaround strategy initiative to launch a revamped mobile app. The mobile app offers region-based coupons, a personal pizza builder and a delivery tracker, and is designed to give customers a streamlined ordering experience. Customer reviews in Google’s (GOOG) Play Store and Apple’s (AAPL) App Store have Domino’s mobile app ranked higher than Pizza Hut and Papa John’s. Domino’s recently added, “one-button ordering” to its mobile app and website, which allows users to quickly order pizzas based on past orders. Customers can also order through Facebook (FB) Messenger with a conversational bot, and through Twitter (TWTR). Domino’s also extended its AnyWare ordering to work on the latest technology including Apple Watch, Amazon (AMZN) Echo, Ford (F) SYNC and Samsung Smart TVs.
Domino’s reported 3Q16 financial results for the three months ended September 11, 2016, with total revenues of $566.7 million, up 17% from 3Q15. The company added 316 stores (franchised and company-owned) in the quarter, growing revenue from stores by 17%, and beat analysts’ revenue estimate of $541.5 million by 5%. For the third quarter, Domino’s reported net income of $47.2 million, or $0.96 per share, a 43% increase from the year ago quarter. Domino’s crushed analysts’ earnings estimate of $0.89 per share by 8% with improved operating margins from lower expenses.
Over the past month, several Wall Street analysts have increased their price target for Domino’s on forecasts of continued growth, and based on historic revenue CAGR of 8% from FY11 through FY15. Domino’s now has an average price target of $163.81 per share (3% upside) and a high price target of $195.00 per share (22% upside).
Todd Johnson, Dividend Lab, www.dividendlab.com, 505-514-0036, November 16, 2016