DOMINO’S PIZZA $34.22 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 56.7 million; Market cap: $1.9 billion; No dividends paid) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 9,924 outlets in the U.S. and over 70 in other countries. Franchisees run most of these stores.
In the quarter ended June 17, 2012, the company’s earnings per share rose 17.5%, to $0.47 from $0.40 a year earlier. Costs fell, including a 12% drop in cheese prices.
Sales declined 2.3%, to $376.1 million from $384.9 million. That’s mainly because of lower sales of ingredients, including cheese, to franchisees. Same-store sales rose 5.7% internationally and 1.7% in the U.S.
Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into digital ordering, including on the Internet and through software applications (or apps) on smartphones. In addition, Domino’s still has lots of growth potential overseas.
The company’s long-term debt is still very high, at $1.5 billion, or 79% of its market cap. However, it continues to steadily pay down its debt, and it has no major loans coming due until 2014.
The shares have jumped 163% for us over the past two years. They now trade at 18.0 times the company’s forecast 2012 earnings of $1.90 a share. However, Domino’s long-term prospects remain strong.
Domino’s Pizza is still a buy.
