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Analyzing Domino’s Valuation Multiple

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Apr. 25 2019, Updated 9:44 a.m. ET

Valuation multiple

Domino’s Pizza’s (DPZ) strong first-quarter earnings drove the company’s stock price, which increased its valuation multiple. As of April 24, Domino’s was trading at a forward PE ratio of 28.6x—compared to 27.4x before the announcement of its first-quarter results. In comparison, Yum! Brands (YUM) and Papa John’s (PZZA) were trading at forward PE ratios of 26.1x and 40.9x, respectively.

Domino’s is trading at 30.1x analysts’ 2019 EPS estimate of $9.42 and at 25.9x analysts’ 2020 EPS estimate of $10.95. The EPS is expected to rise 11.9% and 16.2% in 2019 and 2020, respectively.

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Analysts’ recommendations

With a total of 21 analysts covering Domino’s, 71.4% recommended a “buy,” while 28.6% recommended a “hold.” None of the analysts recommended a “sell.” On average, analysts have given Domino’s a 12-month target price of $303.16, which implies a return potential of 6.6% from its stock price of $283.42 as of Aril 24.

After Domino’s reported its first-quarter earnings, Guggenheim and Cowen and Company raised their target prices. Guggenheim has increased its target price from $285 to $313, while Cowen increased its target price from $295 to $330.

Peer comparisons

Among the 21 analysts covering Yum! Brands (YUM), 38.1% recommended a “buy,” 57.1% recommended a “hold,” and 4.8% recommended a “sell.” Analysts’ 12-month target price for Yum! Brands is $101.06, which implies a fall of 2.2% from its stock price of $103.34.

Among the seven analysts covering Papa John’s (PZZA), 71.4% recommended a “buy,” while 28.6% recommended a “hold.” Analysts’ 12-month target price for Papa John’s is $53.33, which implies a return potential of 5.6% from its stock price of $50.52.

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