Author Topic: DPZ - Domino's Pizza  (Read 7022 times)

SlowAppreciation

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Re: DPZ - Domino's Pizza
« Reply #20 on: February 23, 2018, 10:09:33 AM »
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P/E ratio is a function of growth, ROIC, and cost of capital. I think if you ran the numbers (taking management 5 year projections), you would find that DPZ is actually undervalued. But I need to run to the airport, so I don't have time to do the calculations.


I haven't followed too closely as of late, but what's the projected growth rate from management?

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By saying it is overpriced, I think you are implicitly saying the growth is unsustainable. You might also be unaware of how high the ROIC is for DPZ.

Yeah it was north of 60% when I looked, and honestly, the company requires very little capital to expand. It's simply a great business.


SlowAppreciation

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Re: DPZ - Domino's Pizza
« Reply #21 on: February 23, 2018, 10:10:46 AM »
Surprised there's no thread yet, but the company has healthy FCF, low CapEx requirements, and attractive economics for franchise owners. For those interested, there's a good read in Bloomberg

Wow, did you ever under-sell this one. The economics of this business are insane. This is a company returning >>100% of FCF to shareholders while organically growing earnings 20% per year.

Just starting a deep dive on this but this is surely one of the best businesses in the world.

What's your read on the CEO leaving?

Also, came across this a few months back which I think is worth mentioning: https://www.wsj.com/articles/how-dominos-convinced-wall-street-to-lend-to-them-for-less-1507739797

KCLarkin

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Re: DPZ - Domino's Pizza
« Reply #22 on: February 23, 2018, 10:59:18 AM »
I haven't followed too closely as of late, but what's the projected growth rate from management?

8-12% annual retail sales growth over next 3-5 years.
« Last Edit: February 23, 2018, 11:16:19 AM by KCLarkin »

SlowAppreciation

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KCLarkin

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Re: DPZ - Domino's Pizza
« Reply #24 on: February 26, 2018, 09:56:52 AM »
8-12% annual retail sales growth over next 3-5 years.

Given the strategy, the growth targets seem reasonable. The question is how much EPS grows when revenue growth is 10%. There should be significant operating leverage -- since most of the variable costs are paid by franchisees. DPZ could also buy up to 5% of the float per year, if the stock price is reasonable. So 15-20% EPS growth seems likely. And DPZ only earns $280M per year. So above average growth for many, many years seems possible.

SlowAppreciation

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Re: DPZ - Domino's Pizza
« Reply #25 on: February 26, 2018, 10:43:02 AM »
8-12% annual retail sales growth over next 3-5 years.

Given the strategy, the growth targets seem reasonable. The question is how much EPS grows when revenue growth is 10%. There should be significant operating leverage -- since most of the variable costs are paid by franchisees. DPZ could also buy up to 5% of the float per year, if the stock price is reasonable. So 15-20% EPS growth seems likely. And DPZ only earns $280M per year. So above average growth for many, many years seems possible.

I guess I'm just scared away by the debt. Last I looked they were at something like 8 or 9 debt/fcf

KCLarkin

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Re: DPZ - Domino's Pizza
« Reply #26 on: February 26, 2018, 01:45:50 PM »
I guess I'm just scared away by the debt. Last I looked they were at something like 8 or 9 debt/fcf

6x EBITDA

Jurgis

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