Why Buy Domino’s Pizza Stock?

When you think of growth stocks, you probably imagine technology companies like Nvidia and Meta Platforms. Fast food brands don’t always spring to mind but Domino’s stands out as a top pick that has been getting a lot of attention from analysts and one of the best performers over the past decade.

Should you buy shares in Domino’s Pizza? Currently, it looks like an excellent buy with steady growth and plenty of room to keep growing but has it run too far too fast?

Domino’s Shows Impressive Growth

Domino’s has been growing in several ways for well over a decade.

Restaurant Location Growth

The company has more than 20,500 restaurants around the world. Pizza Hut, the second-largest chain by number of locations, hasn’t reached 20,000 restaurants yet.

Just a decade ago, Domino’s had 12,000 stores. Since then, it has targeted international markets aggressively, opening locations throughout Asia and Europe.

Today, you can buy Domino’s pizzas, wings, salads, and other products in Vietnam, India, New Zealand, Saudi Arabia, and dozens of other countries outside of North America.

Global Retail Sales Growth

Domino’s has also shown impressive retail sales growth in U.S. and international markets. The company’s third quarter 2024 financial report shows a 5.1% increase in global retail sales. That doesn’t include the influence of a strong U.S. dollar compared to other currencies.

Same-store sales also grew, so the increased revenue doesn’t just come from adding locations. Within the U.S., same-store sales grew 3%. Internationally, sales grew 0.8%, a more modest amount that’s still quite reasonable given the effect of creeping inflation around the world.

Domino’s uses a franchise model, so it partially depends on franchise owners to take a chance on its brand. Expanding into new territories will require investments from master franchisers who will then guarantee the right to make money from sub-franchisers within their territories. In other words, there are two ways for Domino’s to grow its international footprint, and that puts it at an additional advantage.

Africa, Asia, and South America represent enormous opportunities for the brand. Focusing on South America, the company has franchises in Aruba, Brazil, Chile, Colombia, Ecuador, El Salvador, Guatemala, Panama, Paraguay, and Venezuela. That leaves several areas the brand could enter, including popular tourist destinations for Americans.

Asia also has ample room for Domino’s to grow. The company already has more than 1,000 locations in India, but it hasn’t even entered Vietnam yet.

Vietnam looks like a particularly promising location because Pizza Hut has already made headway in the country. The Yum! Brands pizza chain has courted Vietnamese diners with recipes that combine traditional pizza styles with the country’s interest in seafood and innovative flavor combinations. Most consumers in Asian countries don’t expect pizza to taste like a specific thing, so Pizza Hut can experiment with cutting-edge flavors that could shape the industry’s Asian market.

It’s possible that Pizza Hut has an advantage in Vietnam because it was the first pizza company to take a chance on the country. Still, the brand’s success could indicate that Domino’s has even more untapped markets it can expand into over the next decade.

Yes, Domino’s has done an excellent job growing in international markets, but there are no signs to suggest it will stop anytime soon.

Is Domino’s Pizza Stock Undervalued?

Domino’s stock looks undervalued with analysts reaching a $482 consensus price target.

Last June, the stock’s value peaked at nearly $534, the second-highest price in the company’s history. (It exceeded $564 slightly at the end of 2021 before experiencing a rapid correction that took it just below the $300 mark.) With shares trading at approximately $436 today, that’s a 20%+ discount from June’s high.

Domino’s Pays an Impressive Dividend

Domino’s has a long history of paying good dividends to stockholders. The last four quarters have paid out $1.51 ($6.04 for the whole year). The four quarters before that paid $1.21 each. When you look at the company’s dividend history, you see an obvious trend toward paying shareholders higher dividends each year. 

For most investors, though, this looks quite impressive. Looking back at the last 11 years, you’ll see a 20% compound annual growth rate for dividend payments.

With ample room to grow and a high dividend percentage, Domino’s is an obvious choice for investors who want to benefit from one of the food sector’s top performers.

Should You Buy Domino’s Stock Now?

Dominos’s Pizza has officially been delisted as of Dec 31, 2024 so it’s not possible to buy it now. Prior to that the consensus from analysts was that investors should buy shares in Domino’s Pizza. 18 analysts gave Domino’s a Buy rating while 11 assessed it as a Hold and none gave it a Sell rating.

At the very least, analysts believed that Domino’s would hold its value, making it a reliable place to park money and earn regular dividends. Most analysts indicated that the stock’s value would likely increase over the next quarter and further into the future.

Obviously, there was some risk in buying shares in Domino’s and the most pessimistic analysts set the stock’s target price at $370. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.