Why Domino’s market cap is rising

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Market cap

Market cap is calculated as total outstanding shares multiplied by share price. Domino’s Pizza, Inc.’s (DPZ) market cap is $4.6 billion. The company is up against competition with huge market cap. For example, Yum! Brands, Inc. (YUM), the parent of Pizza Hut, has a market cap of $29.5 billion. McDonald’s Corporation (MCD) has a market cap of $88 billion. On the other hand, Papa John’s International, Inc.’s (PZZA) market cap is $1.7 billion, which is more similar to Domino’s.

DPZ Enterprise Value 2014-10-18

Enterprise value

In the above chart, you can see that the company’s 3Q14 enterprise value, or EV, was $5.7 billion. Enterprise value is the total value of the company, and is calculated as market cap plus total debt, less cash and cash equivalent.

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In the above chart, you can also see that Domino’s EV has been rising since 2012. Most of this is due to its stock price growth. Part of the reason why Domino’s stock has done well is the company’s solid top-line performance. This metric has grown at an average of 7.4% year-over-year, since 3Q12. This has trickled down to earnings per share, or EPS, which also saw solid average growth of 21% year-over-year, since 3Q12.

Domino’s has also kept pace with product innovation and technological advancements.

But of the many reasons why the company has done so well, the U.S. economic recovery since the recession of 2007 to 2009 is likely the biggest influence. As the economy improves, so does the consumer’s willingness to spend on discretionary items such as restaurants.

Domino’s competes with Pizza Hut, under the umbrella of Yum! Brands, Inc. (YUM), Papa John’s International, Inc. (PZZA), and McDonald’s Corporation (MCD). Yum! Brands and McDonald’s are also held by the Consumer Discretionary Select Sector SPDR Fund (XLY).

In the next part, we’ll see how Domino’s compares to its peers in terms of stock performance.

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