Domino's Pizza, Inc. (DPZ - Free Report) is currently one of the top-performing stocks in the restaurant space and a rise in share price and strong fundamentals signal its bullish run.
Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
Why an Attractive Pick?
Price Performance: A glimpse of the company’s price trend reveals that the stock has had an impressive run on the bourse in the last year. Domino's has returned 24.2%, which compares favorably with the industry’s gain of 19.9%.
The price surge seems to the result of strong investor optimism around the stock, given Domino’s brand recognition, and it continues to ride on various sales boosting and digital initiatives.
Domino’s ranks as the second-largest pizza chain in the world. It is the market leader in the delivery segment in the United States and ranks second in the carry-out segment. Domino’s posted the 26th consecutive quarter of positive same-store sales domestically in the third quarter of 2017. The company has enhanced its brand strength through marketing affiliations with the likes of The Coca-Cola Company and others.
Domino’s continues to boost sales through regular limited time offers (LTO), new product launches and remodeling efforts. It is also investing heavily in technology-driven initiatives to drive sales. These initiatives include the company’s digital loyalty program -- Piece of the Pie Rewards, various ordering apps and platforms (Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter) and anywhere ordering platform innovation, to name a few.
Domino's Pizza Inc Revenue (TTM)
The company continues to ramp up its worldwide digital participation with 25 markets now utilizing its global online ordering platform and more than 70% of stores outside the United States using its proprietary point-of-sale system – Domino's PULSE. Digital leadership is helping the company expand its brand in the domestic market as well as overseas.
Solid Rank & VGM Score: Domino's carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
Northward Estimate Revisions: Four estimates for 2018 moved north over the past 60 days versus no southward revisions, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for 2018 increased 3%. This is encouraging ahead of the earnings season.
We believe that the company’s refranchising strategy will continue to facilitate earnings per share growth by reducing capital requirements. In addition, free cash flow continues to grow, thus allowing reinvestment for increasing brand recognition and shareholder return. Domino’s has a wide franchise network, both domestically and internationally that helps it reduce ownership of restaurants and focus more on re-franchising.
Positive Earnings Surprise History: Domino's has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 6.11%.
In fact, the company’s earnings have surpassed the consensus estimate in each of the last 13 quarters. Given the various initiatives to boost growth, the stock seems to have a decent upside potential.
Strong Growth Prospects: Arguably, earnings growth is of utmost importance for determining a stock’s potential as surging profit levels often indicate solid prospects (and stock price gains). The Zacks Consensus Estimate for 2018 earnings of $7.16 reflects year-over-year growth of 23.9%. The stock has long-term expected earnings per share growth rate of 14.5%.
This strong earnings growth prospect is justified given that the company’s international growth continues to be strong and diversified across markets, driven by exceptional unit level economics.
Some other stocks in the restaurant space worth considering include Darden Restaurants, Inc. (DRI - Free Report) , Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) and McDonald's Corporation (MCD - Free Report) , all carrying a Zacks Rank #2 . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Darden, Cracker Barrel and McDonald's 2018 earnings are expected to improve 13.4%, 13.3% and 9.9%, respectively.
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