|Bid||86.280 x 300|
|Ask||86.290 x 300|
|Day's range||85.730 - 86.580|
|52-week range||65.170 - 87.450|
|PE ratio (TTM)||22.92|
|Earnings date||2 May 2018|
|Forward dividend & yield||1.44 (1.68%)|
|1y target est||85.78|
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Of the three companies considered for our analysis, Domino’s Pizza (DPZ) has been the most favored stock among Wall Street analysts. In the next 12 months, analysts expect the company’s stock price to reach $238.05, which represents a return potential of 2.9%. Domino’s is followed by Papa John’s (PZZA).
Analysts expect Domino’s Pizza (DPZ) to post revenue of $3.08 billion, which represents growth of 10.3% from $2.79 billion in 2017. The revenue growth is expected to be driven by positive SSSG (same-store sales growth) and the addition of new restaurants. For the next three to five years, Domino’s management is expecting its SSSG to be in the range of 3.0%–6.0% for its domestic and international markets.
Investors should be careful while comparing unit growth for companies with different models, as the opening of company-owned restaurants requires higher capital than franchised restaurants. With a unit growth of 7.6%, Domino’s Pizza (DPZ) has outperformed its peers. In the last 12 months, Domino’s Pizza has net added 1,045 units to increase its unit count to 14,856 at the end of 2017.
Same-store sales growth (or SSSG) measures an increase in a company’s sales from its existing restaurants during a certain period. SSSG is an important indicator. Domino’s Pizza (DPZ) outperformed its peers with SSSG of 4.2% in the domestic market.
With revenue growth of 8.8%, Domino’s Pizza (DPZ) outperformed its peers in 4Q17. Papa John’s (PZZA) posted revenue growth of 6.4% while Yum! Brands (YUM) posted a decline of 22.1%. For 4Q17, Domino’s Pizza posted revenue of $891.5 million, which represents growth of 8.8% from $819.44 million in 4Q16.
All major pizza companies have announced their 4Q17 earnings, so it’s time to compare their performance. Since the announcement of their 4Q17 earnings, stock prices for Domino’s and Yum! Brands have increased while Papa John’s has declined.
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As of March 1, 2018, Papa John’s (PZZA) was trading at $60.04. On the same day, analysts were expecting the company’s stock price to reach $66.43 in the next 12 months, which represents a return potential of 10.6%. The lower-than-expected 4Q17 EPS appear to have prompted analysts to lower their 12-month target price for Papa John’s. After the announcement of 4Q17 earnings, Jefferies cut its target price from $60 to $52, and Longbow Research has lowered its target price from $75 to $65.
Due to high visibility in Papa John’s (PZZA) earnings, we have opted for the forward PE (price-to-earnings) multiple. The forward PE multiple is calculated by dividing the company’s current stock price from analysts’ earnings estimate. The initiatives taken by the company’s management to improve its SSSG (same-store sales growth) appear to have increased investors’ confidence, leading to a rise in Papa John’s stock price and its valuation multiple.