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Bull of the Day: Domino's Pizza (DPZ)

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Despite a pretty solid economic situation, it has been a rough stretch for the restaurant sector. Heavy competition and changing consumer tastes are taking their toll, while investors have largely moved on to higher growth areas of the economy.

And while that might be the case for most of the companies in this segment, is it true for all of the restaurants? I would definitely argue no, and that is particularly true if you look at the fundamentals for Domino’s Pizza (DPZ - Free Report) .

Domino’s in Focus

While Domino’s is off of its highs like a number of other restaurant stocks, the company has come surging back in recent weeks and is arguably well-positioned for its earnings report later this week. In fact, the momentum has been so strong in the shares that it has earned itself a ‘B’ grade on this front, and industry crushing metrics too.

And it isn’t hard to see why the momentum has been strong when we consider that the sell-off in shares for this company was probably overblown, and that fundamentals remain intact. Analysts have actually been raising estimates for the company’s earnings prospects in recent weeks, so if anything, the story is improving for DPZ investors.

Recent Estimates

If we look to the most recent earnings estimates, we see that analysts have been raising their projections for DPZ’s earnings prospects, almost unanimously. Double-digit percentage EPS growth is projected, while we see a similar level of sales growth baked into the numbers too.

And remember, this is in a time that DPZ shares were facing rocky trading, so the fundamental story definitely didn’t lineup with the negativity that investors were largely seeing in the shares. Plus, with earnings fast approaching and estimates still rising into the report, there is plenty of hope that the stock can continue on its recent rebound and hit fresh highs once more.

Domino's Pizza Inc Price and Consensus

 

No wonder the stock has earned a Zacks Rank #1 (strong buy) and why we are looking for additional strength in this name in its earnings report later in the week.

Bottom Line

Investors have been obsessed with growth stocks in this environment and they have been punishing many restaurant names as a result. In many ways you can’t blame these investors as competition really looked to derail the growth story for a lot of names in this area.

But companies like Domino’s look to persevere in this environment nonetheless, as it remains a top value and convenience choice for hungry customers that is unmatched. Sure, Pizza Hut is trying hard to make headway in this market, but Domino’s remains in an enviable position and is expected to post strong numbers later this week as a result.

So, don’t automatically dismiss all the players in the restaurant industry these days. Some are still on a growth track, so focus on these firms—such as Domino’s—if you want to prosper in this difficult, but still profitable, environment.

 

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