About Domino’s Pizza
Let’s get one thing straight.
There’s Big Tech, Big Education and other immensely large companies within their respective industries, but many are quick to forget about one of the most important categories, Big Pizza.
And if any company completely and utterly represents Big Pizza, it is without a shadow of a doubt Ann Arbor, Michigan-headquartered Domino’s Pizza.
They’re like Apple but with Pizza.
Although we’ve written about Big Pizza before, Domino’s takes the cake, given that it is quite literally the largest pizza company in the world.
Whoops.
I mean Pizza.
But don’t worry, Domino’s sells cakes too.
To provide some form of scale of just how large and well established Domino’s is, it’s worth mentioning that this pizza gargantuan reportedly has around 6,500 total stores in the United States alone, whereas the company apparently has just about exactly double that amount of stores outside of the United States.
It’s fascinating that this company has a phenomenally larger presence outside of the United States, as we wouldn’t have initially assumed that to be the case.
Additionally, we’d like to briefly add that this company is quite similar to famed restaurant chains such as McDonald’s and Wingstop in the sense that the vast majority of its physical store locations are franchised, with a small percentage of stores being outright corporate-owned.
Reaching around 90 international markets, this company clearly has far greater reach and scale than many of its formidable competitors, such as Papa John’s, Pizza Hut, Little Caesars, MOD Pizza, Marco’s Pizza, not to mention the local and regional chains that many ascribe sentimental value and most certainly give a company like Domino’s a challenge in winning over the hearts of the locals.
At any rate, Domino’s is certified Big Pizza with, if we don’t say so ourselves, an incredible marketing team, strong presence in the United States and certainly around the globe as well as some very delicious pizza and other popular offerings such as chicken wings, its new loaded tots, pasta dishes, sandwiches, salads, desserts and sodas aplenty.
Now, before we make ourselves unbearably hungry, let’s cut to the chase and take a look at Domino’s core financials, one slice at a time.
Domino’s’ stock financials
Trading at a share price of $313.44 with a market capitalization of $11.08 billion, a price-to-earnings (P/E) ratio of 24.01 and an annually distributed dividend of $4.84, it seems as though Domino’s share price at the moment is a bit rich, but not by an unbearable amount, as its P/E is just a few points higher than that of the fair value benchmark of 20.
Also, this company distributes a rather attractive annual dividend to its shareholders of nearly $5 per share, which is a plus in our eyes.
As it pertains to the company’s balance sheet, Domino’s’ executives are in charge of tending to just north of $1.6 billion in terms of total assets along with around $5.8 billion in total liabilities.
At first, we were very alarmed by just how total liability-heavy this company is, however, upon further review it appears as though the company has mostly long-term debt on its books, totaling almost $5 billion alone.
While we still would’ve liked to see a more total asset-heavy overall balance sheet structure, the pizza business, as seen in previously written stock analysis articles is one filled with a heightened amount of debt and candidly, we’re just happy that most of the company’s outstanding debt(s) are long-term in nature.
Additionally, even though this is a comparably mature company within its respective sector, Domino’s in particular is still growing at a rapid rate, planting new stores across the world and actively expanding its menu options, all of which require the company to put its money where its mouth is and (responsibly) take on some debt.
However, given the company’s past and current track record of same store sales growth and its market share in the space, we’re not all too concerned that the company will be forced to file Chapter 11 (restructuring) bankruptcy anytime soon.
Onto the company’s income statement, Domino’s total annual revenue since 2018 has been steadily growing, sitting at around $3.4 billion in 2018 and rising each year to its latest reported figure of just more than $4.5 billion in 2023, according to TD Ameritrade’s platform.
This thankfully indicates that the company is still expanding at a brisk pace and capturing the attention of the markets it is entering.
With regards to the company’s cash flow statement, both its net income and total cash from operations (also since 2018) have been consistent and positive, even during what has so far been the worst of COVID-19.
It’s absolutely a positive to find that Big Pizza, or at least the leader of the pack has been able to power through the recent COVID-19-related, supply chain and inflationary pressures imposed on the industry, and small and large business across the board.
Domino’s’ stock fundamentals
With great market share and exceptional unit economics usually follows strong trailing twelve month (TTM) net profitability.
Domino’s came through on this one.
More specifically, according to TD Ameritrade’s platform, the company’s TTM net profit margin stands at 10.24% in comparison to the industry’s average of 5.60%.
Maintaining a TTM net profit margin nearly double that of the industry’s average isn’t too shabby at all, especially in an industry that is particularly competitive when it comes to margins in a broader sense.
Additionally, the company’s TTM returns on assets and investment(s) are nothing short of impeccable, as, also according to TD Ameritrade’s platform, they tower over the industry’s averages.
For example, the company’s TTM returns on assets stand at an impressive 28.12% to the industry’s average of 5.62% while its TTM returns on investment(s) stand at an even more substantial 43.07% compared to the industry’s average of 8.15%.
It’s great to know that Domino’s is a very, very efficient company and is garnering handsome returns on these important fronts.
A consideration for Domino’s
Domino’s has a lot going for itself.
With distinct brand power and market share, a fantastic comparable TTM net profit margin, exceptionally well positioned TTM returns on assets and investment(s), there isn’t much to pick at other than its balance sheet, which is total liability-heavy but fortunately, is composed mostly of long-term debt, giving the company a total liability cushion.
Putting this all together, however, we still think Domino’s should consider making itself a little more separated from the competition.
One of the ways it could do that is bidding for one of the industry’s longtime favorite suppliers of cheese for pizzas, arguably the most critical ingredient, Denver, Colorado-based Leprino Foods.
Leprino supplies cheese for Domino’s, Pizza Hut, Little Caesars, Papa John’s, Hungry Howie’s, Digiorno among many other pizza brands and companies that depend on Leprino’s quality product.
This might be an excellent way to get a tighter rein on the company’s supply chain, which could in the long run potentially bring down current supplier-related costs while simultaneously taking the Big Cheese away from its competitors, probably putting them at a great short-term and perhaps long-term disadvantage.
Business is business and this could be a great opportunity for Domino’s.
Should you buy Domino’s stock?
Putting everything discussed in this stock analysis article together, Domino’s is a great company on its own that needs to pick away at some of the long-term debt on its books.
Its margins and returns are incredibly strong, its annual dividend yield is attractive, its finding ways to expand and beat out its tough competitors and whether or not the company ends up buying the industry’s favorite cheese supplier, we think the current trajectory of growth and its proven ability to punch through some rough economic air justifies paying a small premium for shares in the company’s stock (NYSE: DPZ), which in fact has come down from a high in late 2021 of around $565.
We give the company’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.