After Stephen Anderson of Maxim downgraded Domino’s Pizza (DPZ) on June 8, its stock price fell as low as $263.06. Later in the day, the stock improved and closed at $270.04—a fall of 0.74% from the previous day’s closing price.
In 2017, Domino’s Pizza returned 18.7%. The company’s stock price has increased 42.9% since the beginning of 2018. In the first quarter, Domino’s Pizza outperformed analysts’ EPS and revenue expectations. Domino’s Pizza posted same-store sales growth of 8.3% in the domestic market—compared to analysts’ estimate of 4.7%. Strong first-quarter earnings appear to have increased investors’ confidence, which led to a rise in the company’s stock price. Papa John’s (PZZA) and Yum! Brands (YUM) have returned -7.3% and 1.9% YTD (year-to-date), respectively. The broader comparative indices, the S&P 500 (SPY) and the Consumer Discretionary Select Sector SPDR ETF (XLY) have returned 4.0% and 11.4%, respectively.
For the next four quarters, analysts expect Domino’s Pizza to post revenues of $3.53 billion—a rise of 19.5% from $2.95 billion in the same four quarters last year. During the same period, analysts expect the company’s EPS to rise 26.9% to $8.48.
As of June 8, Domino’s Pizza was trading at a forward PE multiple of 30.6x. On the same day, Papa John’s and Yum! Brands were trading at forward PE multiples of 20.4x and 23.2x, respectively. Strong same-store sales growth, unit growth, and higher margins allowed Domino’s Pizza to trade at a higher valuation multiple than its peers.