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Domino's Pizza Stock Analysis | DPZ Stock | $DPZ Stock Analysis | Best Restaurant Stock to Buy Now? - YouTube
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hello and welcome back to global value in today's聽
video we will be performing a fundamental stock聽聽
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analysis of domino's pizza ticker symbol dpz聽
by taking a look at the company's financials聽聽
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currently domino's is trading for just over 350聽
dollars a share over the past year they're down聽聽
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about 12 percent over the past 10 years they're up聽
with a 26 compounded annual return and since 2005聽聽
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over the past 17 years they've been able to聽
return about 20 percent compounded annually really聽聽
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domino's has been one of the best performing聽
stocks since the global financial crisis聽聽
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so domino's is trading about 15 over its 52-week聽
low which has been cut down significantly from聽聽
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its 52-week high of almost 570 dollars a share at聽
the time of recording this video domino's is about聽聽
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a 13 billion dollar market cap some background聽
about the business domino's pizza is a restaurant聽聽
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operator and franchiser with nearly 19 000 stores聽
across more than 90 international markets the firm聽聽
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generates revenue through the sales of pizza wings聽
salads and sandwiches at company owned stores聽聽
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royalty and marketing contributions from franchise聽
operated stores and its network of 26 domestic聽聽
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and 5 canadian dough manufacturing and supply聽
chain facilities which centralized purchasing聽聽
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preparation and last mile delivery for the firm's聽
u.s and canadian restaurants with roughly 17.7聽聽
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billion dollars in 2021 system sales domino's聽
is the largest player in the global pizza market聽聽
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ahead of pizza hut papa john's and little caesars聽
domino's pizza was founded in 1960 and is based in聽聽
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ann arbor michigan so we'll be performing an eight聽
pillar analysis as popularized by everything money聽聽
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before we get into it let's get ourselves聽
in the right mindset by covering the four聽聽
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principles of value investing principle number聽
one you're not buying and selling pieces of paper聽聽
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or a line that goes up and down on a chart you're聽
buying fractional ownership of a business and you聽聽
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should think of it as if you're buying the whole聽
business principle number two insist on a margin聽聽
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of safety all companies are worth the sum of all聽
cash they'll produce from now until judgment day聽聽
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discounted by some reasonable interest rate if you聽
can figure that out then you should pay a price聽聽
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well below that principle number three mr聽
market your job is to make mr market work聽聽
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for you and not the other way around mr market聽
gives you quotes on businesses every few minutes聽聽
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when he's providing you with quotes that are聽
way too low you should be buying from him聽聽
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and when the quotes are way too high you聽
should be selling and principle number four聽聽
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circle of competence as investors we don't聽
deserve to make money from things we can't聽聽
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understand and to ask the question is this within聽
my circle of competence is to answer the question聽聽
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so with that mindset let's get right into our聽
stock analysis starting off with pillar number聽聽
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one we want domino's average five-year pe to be聽
below 22 and a half so currently they're trading聽聽
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at a 26 p e and looking back over the past five聽
years their average pe is about 35 so this one's聽聽
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gonna be an x pillar number two we want domino's聽
average five-year return on capital to be above聽聽
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nine percent domino's is an elite company when聽
it comes to return on capital over the past聽聽
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five years they've actually averaged a 91 return聽
on capital each year that is 10 times that metric聽聽
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we were looking for these guys are hyper聽
efficient at getting solid returns on their聽聽
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investments and being able to sustainably聽
produce this high of return on capital聽聽
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puts dominoes in elite territory this is a聽
massive check for pillar number two pillar聽聽
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number three we want to see five-year revenue聽
growth this one's another check in 2017 they had聽聽
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2.8 billion dollars of revenue they grew this聽
to 4.3 billion in 2021. so back-to-back checks聽聽
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for pillar number four we want to see five-year聽
net income growth this one's another check in聽聽
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2017 they had about 278 million dollars of net聽
income they grew that to 510 million in 2021.聽聽
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for pillar number five we want to see decreasing聽
shares outstanding and that's exactly what we see聽聽
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here with dominoes they've decreased their shares聽
from about 48 million shares outstanding in 2017聽聽
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down to about 38 million in 2021 so that's our聽
fourth check in a row this means that as an聽聽
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investor you have more owner earnings coming your聽
way pillar number six we're looking for five-year聽聽
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free cash flow growth domino's has done a great聽
job growing cash flows they've more than doubled聽聽
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it over the past five years free cash flow is the聽
column in blue here they've more than doubled it聽聽
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in the past five years 2017 they had 251 million聽
dollars of free cash flow and that's increased聽聽
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to 560 million as of the end of 2021. domino's聽
five-year average free cash flow comes out to聽聽
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400 million dollars a year so that's gonna be聽
used going forward on pillar seven and eight聽聽
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so pillar number seven we want their net debt to聽
be below their five year average free cash flow聽聽
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multiplied by five we want them to be employing聽
reasonable amounts of leverage in their business聽聽
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it's just like personal finances where the more聽
debt you have the harder it's going to be when聽聽
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things go wrong domino's currently has 5.1 billion聽
dollars of debt multiplying that 400 million聽聽
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dollars of free cash flow times five brings us to聽
two billion dollars they have a lot of debt here聽聽
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they've increased this as well over this time this聽
is more debt than we'd like to see it's likely聽聽
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that they're taking out a lot of this as their聽
financing and opening up new restaurants one thing聽聽
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a 10k can tell us here is how long does it take聽
them to turn a profit from when they open a new聽聽
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restaurant that can tell us if some of this debt聽
is more manageable finally pillar number eight the聽聽
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big pillar of them all we want their market cap聽
to be below their five-year average free cash flow聽聽
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multiplied by 20. domino's currently has a聽
market cap of just under 13 billion dollars聽聽
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multiplying that five-year free cash flow of聽
400 million dollars a year times 20 brings us聽聽
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to eight billion dollars so roughly two-thirds of聽
their current market cap based on their free cash聽聽
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flow profile right now domino's looks expensive聽
so in summary domino's checks the box on five聽聽
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out of eight pillars they average huge returns on聽
capital they're growing steadily they're buying聽聽
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back shares they've more than doubled their free聽
cash flow over the last five years however they聽聽
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miss under two valuation pillars for pe and market聽
cap and domino's employs a lot of debt in their聽聽
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business to learn more about the business read聽
through their annual report dive into their 10k聽聽
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build up that circle of competence around dominoes聽
work to understand their competitive advantages or聽聽
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lack thereof and see if you can come to reasonable聽
projections of where domino's as a business is聽聽
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going to be 10 years from now that's it for our聽
analysis of domino's pizza ticker symbol dpz聽聽
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if you enjoyed the video please be sure to like聽
the video subscribe to the channel for more stock聽聽
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analysis videos and comment down below what聽
business you want me to take a look at next聽聽
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thanks for taking the time to learn聽
about domino's and have a great day
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