Can anyone explain how Dominos Pizza has risen 80% in the last year and 600% in the last 6 years?
A company that’s been around 40 years in a highly competitive business with zero moat, at a time when I thought people weren’t eating carbs any more, and the talk of raising minimum wage. 45 P/E !! I’m real skeptical. Or maybe we all should open a pizza chain.
No real explanation, but Cramer came out strongly for them not all that long ago.
My family orders Domino’s all the time. It’s practically a Friday night tradition. There is simply not a more convenient (or cheaper) way for a family of six to eat. My wife orders it on the app, by pushing one button, on her way home from work and picks it up on the way home. You can order and pay for the pizza with the app, on Twitter, and I think Facebook (but not sure about Facebook).
Two large pizzas for $7.99 each is really hard to beat. And the pizza is a lot better than it used to be. It’s really not bad. It’s not great either, but for $16 I’m not complaining.
Obviously that doesn’t mean the stock will continue to do well, but its seemed like its been firing on all cylinders for a while now. Same store sales are up 13%. Revenue up 17%. EPS up over 40%. It does have a high PE and its always seemed to expensive to pull the trigger but I’ve never been able to get it on a good enough dip.
In early 2010, stock was going for under $8. Today it reached $182.96.
So, personally, I think it has a fantastic moat. Its convenient, cheap, and fast. Quality wise? Its okay. But nobody is expecting gourmet when they order Domino’s.
Matt
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Hindsight being 20/20, Dominos should have been a no brainer investment.
Think of how many colleges there are and how many of those kids get pizzas delivered.
Then there are the families, both parents working, kids doing their after school activities, the family stressed for time, so they call and have a pizza delivered. Plus it’s dirt cheap and there are certainly a whole lot of families struggling to keep up.
Then you have all the advertising the Dominos does, strong marketing.
People love pizza, and Dominos hit the sweet spot of the market.
I missed this one unfortunelty as it seems now like it really was a no brainer.
Chris
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Dominos is a great example of what sort of investor you are. Do you see ahead and invest for the long term like a venture capitalist, or do you want stable, less risky returns.
When Ted Turner started out I saw the historical balance sheets for his company, they were atrocious! Awful, but he was creating a new business model, a Rule Breaker if you will, in the field of cable television that was just starting to break out.
Dominos became the go to pizza place. Never cheap, never quite making sense, but always on the top of everyone’s mind. And so it goes, yet again…we see this story played over time and time again. Most of the time we are too cynical to play along. For whatever that sentiment is worth.
Btw I prefer Digiorno’s pizza, or even better a new pizza from Wisconsin, but neither as cost effective as Dominos.
Every safe and “cheap” investment I have ever made has turned into a loss, everyone. I cannot think of an exception. Some of my other investments have not turned out as well as I like, but some have. There is an SAT question there, so what logical conclusion can we draw…
Tinker
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What makes DPZ a great stock is that it’s a well-run franchisor. It earns ridiculous returns on invested capital. It’s literally the best business model you can have – you’re simply selling a brand over and over again and collecting royalties with minimal capex. And management has been running the right playbook when you have such high ROIC – borrow and buy back stock.
Guess which other fast food restaurateur just spun off its China division and is now quickly becoming a pure play franchisor with minimal capex? YUM.
Jim
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DPZ is facing some strong headwinds. The Atkins diet is back and it is gathering steam under new names such as “Ketogenic diet”, “Paleo”, “South Beach” and others. With strong scientific evidence behind it, dietary guidelines in the US are going to be turned upside-down in the next 10 years. People are going to be told to cut their carb intake by 75%.
The “eat less fat, exercise more” guidelines proved to be an unmitigated disaster. It caused an epidemic of heart disease, type 2 diabetes and obesity. It is now being linked to Alzheimer disease, as well.
DPZ will face similar issues facing the tobacco companies. How to convince people to buy a product that kills them slowly?
Maybe they will just export pizza to poor countries overseas?
#6
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DPZ will face similar issues facing the tobacco companies. How to convince people to buy a product that kills them slowly?
I haven’t looked into DPZ at all, but this is simply speculation. I agree that a low carb diet is far better than the current diet of most. I’ve also done a “low carb” diet several times to lose weight. It flat out works.
However, does that make me believe the overall diet of Americans is going to change dramatically over the next 10 years? That, I’m certainly not so sure about. It is very tough to predict the eating habits of the majority of people.
Your speculation forgot one thing. Affordability. For many Americans, that is the primary driver of diet.
Take care,
A.J.
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DPZ is facing some strong headwinds. The Atkins diet is back and it is gathering steam under new names such as “Ketogenic diet”, “Paleo”, “South Beach” and others. With strong scientific evidence behind it, dietary guidelines in the US are going to be turned upside-down in the next 10 years. People are going to be told to cut their carb intake by 75%.
The carb vs. fat is not so simplistic, there are carbs and carbs as well as fats and fats, both good and bad. Humans are omnivores but are not designed to eat the junk inside packaged foods. Most of the harm has come from packaged foods which in turn are the result of stupid government guidelines – the low fat diet.
I’ve lost over 45 pounds on a low junk fat, low junk carb diet.
The Bachelor’s Cuisine
Since my dad had a hotel I was the guy who usually brought the food for our long distance sailboat races. Over time, I became the ship’s cook. Cooking is a creative art and I took a fancy to it. Now I want to share some of my culinary inventions. Simple but tasty.
http://softwaretimes.com/recipes.php
Denny Schlesinger
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There had been intense research in this area in the last 5 years that had not trickled down to the mainstream media, which is why you and your primary physician have not heard about it, yet. It will become common knowledge in the next 10 years. The Atkins diet had won decisively. Your primary doctor is spouting what they were told in med school twenty years ago and it was all wrong.
The next time you get ready to order pizza for your kids, ponder the following quote from a research paper published recently…
"
High glucose levels have been shown to accelerate cancer cell proliferation in vitro, while glucose deprivation has led to apoptosis. These findings have initiated further study of the effects of carbohydrate restriction on tumor growth. Clinical evidence shows that lower blood glucose levels in late-stage cancer patients have been correlated with better outcomes.
"
Source:
Klement RJ, Kämmerer U (2011). “Is there a role for carbohydrate restriction in the treatment and prevention of cancer?”. Nutrition & Metabolism. 8: 75
Carbohydrates are sugar
Sugar is cancer food
Sugar kills in many different ways…
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No. of Recommendations: 1
There had been intense research in this area in the last 5 years that had not trickled down to the mainstream media, which is why you and your primary physician have not heard about it, yet.
As I said in my original reply, I’m extremely familiar with these diets and have done them myself.
Try telling a family of four getting squeezed from all directions economically they needs to replace their low cost, quick food diet with a high cost, slow food, cook at home diet because it will be better for their health. See how far you get and how quickly they don’t change…
A.J.
7 Likes
Diet! Oh come on. We live longer today despite the scourge of sugar, sugar drinks, cell phones (and brain cancer), and the invention of the Twinkie.
Yes, I have found a high quality meat diet, including steak, chicken and pork chops is the best way to go. But I still eat cookies, toast with plenty of butter and jelly, and wonderfully done pasta with meatballs, and sun dried tomatoes with garlic on hot dogs of any variety, spectacular. Saving room for copious amounts of beer.
Dominos is not my preferred pizza, but dip it in their garlic butter sauce, very yummy. A pizza a week for dinner is not going to kill anyone, nor adversely affect their health. The whole key to most everything and to diet is MODERATION.
Pizza is good! As the Dominos pizza commercial goes, and so it is.
Just remember Krispy Kreme that once had a similar P/E, and had it for a long time. The problem with Krispy Kreme was that as beloved as donuts are, they saturated their markets, and thus growth slowed.
When will this happen with Dominos? Will it happen? Happened to McDonalds at some point as well. It won’t be the changing American diet, that despite elitist opinion of particularized diets, Americans are eating more and more crap every generation and it ain’t gonna change any time soon.
Crap in moderation, what the heck.
Tinker
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Getting back on track, it’s worth pointing out that Papa John’s (PZZA) has also gone up about the same 80% these past 12 months, and is up multiple baggers in the last 6 years (although not quite as much as Dominos).
I don’t know that these are growth stocks anymore, but they both sure were. Does anyone know if they have always traded in tandem, or do they jockey against each other?
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OK - I’ve been resisting the urge to chime in (already sent a couple of private notes. But I can’t stay out any longer.
The first time I visited China was in 2007. It was rare (I mean very, very unusual) to see a fat teenager, especially the girls. All petite, slim little things that needed weights in a wind storm lest they get picked up and carried away like a leaf.
And, Yum brands had not penetrated so very much. McDonald’s could be found, but not ubiquitous. Western fast food was here, but not everywhere. And not even that popular. Yeah, kids (and even an occasional adult) could be found hanging out there. But I got the impression they’d buy a coke or something and sit with friends while nursing it. Traditional Chinese foods were still preferred. Lots of veggies
I’m in China right now. 10 years later. Fat teenagers are everywhere. Even girls. American fast food is everywhere. And copy-cat Chinese chains have sprung up as well. No, the menu is not exactly the same as in the US. Pizza with seafood toppings are popular, KFC style shrimp and other unrecognizable meat (I think) products. But most of the American menu is there as well (and not just for the tourists that want to eat something familiar).
I think American fast food and soft drinks are a secret weapon used to disable the Chinese population. It’s almost a return to the days when the Astor, Forbes and other westerners made a fortune selling opium to the Chinese.
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Unlikely that it will ever become much of an issue for physicians. The AMA has no nutritional guidelines whatsoever. The focus of Western medicine is on curing illness, not promoting wellness. At best, there may be a leaflet in the doctors office.
Agree. Western Medicine is not about curing anybody. It is about symptom control, keeping you slightly above water so you can continue to consume costly medications.
Type-II diabetes is a man-made disease that is 100% curable by lowering carb intake. I was shocked to see medical information leaflets produced by Pharma vendors (Eli lilly, Pfizer) telling patients that they need to eat carbs. Of course they do, God forbid they will be cured and stop relying on medications. They are deliberately spreading mis-information.
Medical doctors are not taught about nutrition in med school. Dietitians and other nutrition professionals simply echo the USDA food pyramid which is completely wrong.
The only reliable information you can get right now is from the researchers in the bleeding edge but most people don’t have access to those people.
#6
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“Diet! Oh come on. We live longer today despite the scourge of sugar, sugar drinks, cell phones (and brain cancer), and the invention of the Twinkie.”
We live longer today despite a crappy diet because of healthcare, drugs, and an industry that profits not from us taking care of ourselves, but one that thrives by keeping unhealthy people alive longer.
You want to really fix the healthcare system? Get people to eat a healthy diet and excersise.
As for Dominos, any perceived scare and price drop from the masses starting to cut carbs and eat healthy, I would see as a buying opportunity because most people want comfort food at an affordable price and are not the types to start making changes in their lives to be healthier.
A friend of mine produced a movie called “Tree of Life” years ago. They picked 12 people from around the country with diabetes 2, brought them to a healing center in southern Arizona to do nothing but eat a macrobiotic diet, meditate, take walks and get spiritual counseling. All 12 within weeks had their health improve, one man left as he didn’t want to continue, the 11 others all got off their insulin within a month. As they went back to their lives at home, only one was willing to make the changes and sacrifices to continue this new healthy path. The other 10 within months all reverted to their prior unhealthy lives.
So yes the majority of Americans even knowing that they are slowly killing themselves will still tasked that unhealthy path.
Sadly a company like Dominos will always find its customers.
Chris
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The movie is actually called “Simply Raw”, it was shot at “The Tree of Life” in Arizona.
Also it was a raw food diet.
Sorry, it’s been a while so I looked it up st in case anyone was interested in watching it.
And yes, diabetes 2 and just about every auto immune decease and cancer are all because of poor diet and very little excercise.
Chris
Forks Over Knives is another very interesting documentary about addressing disease and reliance on medication through diet. Worth the watch IMO.
So yes the majority of Americans even knowing that they are slowly killing themselves will still tasked that unhealthy path.
Sadly a company like Dominos will always find its customers.
Uh, oh.
I ordered a pizza from Domino’s tonight. It’s a medium pan pizza with sausage and spinach.
I’m about 5’ 10" and 165. I have low cholesterol and triglycerides. I don’t drink, smoke and I do some of of workout usually 5-7 times a week. A lot of that s walking as I try to get 10,000 steps daily. I also lift weight and do a workout with those colorful big rubber band things.
Fool on,
mazske
All holdings are listed in my profile
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Uh, oh.
I ordered a pizza from Domino’s tonight.
No worries, Mazske. I already outed myself as feeding my family the poison every single week!
Matt
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