Comparing DPZ’s, PZZA’s, and YUM’s Valuation


Sep. 26 2018, Updated 5:25 p.m. ET

Comparing valuation multiples

To analyze Domino’s Pizza’s (DPZ), Papa John’s (PZZA), and Yum! Brands’ (YUM) valuation, we’ll compare their forward PE multiples, which are computed by dividing their stock price by analysts’ earnings estimate for the next four quarters. As shown in the graph below, Domino’s has a higher PE multiple than peers. The company benefited from its strong SSSG (same-store sales growth) and aggressive expansion strategy. As of yesterday, Domino’s forward PE multiple was 31.6x.

Despite its stock price falling, Papa John’s forward PE multiple has increased from 19.9x at the beginning of 2018 to 29.3x. Its lower-than-expected performance in the first half of 2018 appears to have compelled analysts to lower their EPS expectations, boosting the company’s forward PE multiple.

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As of yesterday, Yum! Brands’ forward PE multiple was 24.1x, compared with 25.7x at the beginning of the year. Analysts are optimistic about Yum! Brands and have raised their EPS expectations, bringing down its forward PE multiple. Next, we’ll look at analysts’ recommendations for the three pizza stocks.


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