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Domino’s Pizza: Analysts Favor a ‘Buy’ Rating

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Jan. 2 2019, Updated 1:15 p.m. ET

Analysts’ recommendations

Among the 22 analysts that follow Domino’s Pizza (DPZ), 59.1% recommended a “buy” as of December 28, while 40.9% recommended a “hold.” None of the analysts gave the stock a “sell” rating. On average, analysts have set a target price of $294.40, which represents an upside potential of 17.8% from $249.95.

On December 19, Barclays raised its target price from $255 to $261. On October 22, UBS initiated coverage on Domino’s Pizza with a “neutral” rating and a target price of $285.

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Peer comparisons

Among the seven analysts following Papa John’s (PZZA) stock, 71.4% recommended a “buy,” while 28.6% recommended a “hold.” Analysts have set a 12-month average target price of $59.333 on the stock, which represents an upside potential of 46.8% from its stock price of $40.43.

Among the 24 analysts following Yum! Brands (YUM), 41.7% recommended a “buy,” while 58.3% recommended a “hold.” Analysts have set an average target price of $95.0 for Yum! Brands with an upside potential of 3.7% from its stock price of $91.61.

Valuation multiple

As of December 28, Domino’s Pizza was trading at a forward PE ratio of 26.4x—compared to 27.3x at the beginning of 2018. Although Domino’s Pizza’s stock price has risen since the beginning of 2018, its valuation multiple has declined due to analysts’ optimism about the company’s future earnings. Analysts increased the EPS expectations for the next four quarters. The company is trading at 29.5x analysts’ 2018 EPS expectations and 26.2x analysts’ 2019 EPS expectation. Domino’s Pizza’s EPS is expected to increase 43.3% and 12.6% in 2018 and 2019, respectively.

Papa John’s and Yum! Brands were trading at a forward PE ratios of 27.0x and 24.1x, on the same day, respectively.

Next, we’ll discuss analysts’ revenue expectations for 2018 and 2019.

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