Digitalization And Urbanization Will Expand Delivery Horizons

Key Takeaways

• Aggressive cost reduction and localized management are poised to rapidly expand margins, boost franchisee profitability, and drive renewed network growth.
  
• Sustained digital innovation and demographic trends favor Domino's, strengthening its competitive edge and supporting long-term revenue acceleration.
  
• Shifting consumer preferences, fierce competition, pricing risks, market saturation, and cost pressures could limit Domino's sales growth and compress profit margins over time.

Catalysts

Operates retail food outlets.

• Analysts broadly agree that cost-cutting and operational simplification will benefit margins, but management's notably accelerated, direct, and high-urgency approach to SG&A and IT streamlining-what Jack Cowin described as "moving heaven and earth"-could deliver margin expansion and cost-out at a far higher scale and faster pace than currently modeled, with potential for $100 million or more in EBITDA impact.
  
• While consensus expects store closures (especially in Japan) to reduce losses and produce modest network benefits, the realized benefits are already tracking to plan and management is signaling these closures, combined with increased field support, could materially boost corporate P&L and franchisee reinvestment appetites, thereby reigniting network expansion and driving outsized earnings leverage.
  
• Domino's is strongly positioned to capitalize on the structural shift toward digital and app-based food purchasing, given its sustained, above-peer investment in proprietary digital ordering, automation, and AI-driven logistics-a multi-year advantage that could yield share gains, improved order conversion rates, and stronger revenue per order as digital adoption accelerates globally.
  
• Demographic trends, including rapidly rising urbanization and the intensifying demand for fast, convenient dining, are likely to structurally shift market share toward dominant, delivery-first brands; Domino's entrenched store network, shorter delivery times, and market leadership in key geographies position it uniquely to capture an outsize share of incremental addressable market growth, supporting sustained multi-year revenue acceleration.
  
• The move to localize country management, increase in-market accountability, and deploy more operational trainers in the field is an underappreciated catalyst that stands to uplift execution quality, regional same-store sales, and franchisee profitability, potentially driving a virtuous cycle of higher unit economics, more store openings, and compound earnings growth.

Domino's Pizza Enterprises Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Domino's Pizza Enterprises compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Domino's Pizza Enterprises's revenue will grow by 6.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -0.2% today to 6.9% in 3 years time.
• The bullish analysts expect earnings to reach A$190.0 million (and earnings per share of A$1.99) by about September 2028, up from A$-3.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 23.9x on those 2028 earnings, up from -372.3x today. This future PE is lower than the current PE for the AU Hospitality industry at 35.2x.
• Analysts expect the number of shares outstanding to grow by 2.11% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.48%, as per the Simply Wall St company report.

Domino's Pizza Enterprises Future Earnings Per Share Growth

Risks

• The long-term global trend toward healthier eating and plant-based diets may erode Domino's core pizza category demand, thereby reducing the company's future addressable market and impacting topline revenue growth over time.
  
• Intense industry competition from online delivery aggregators like Uber Eats and DoorDash, now providing wide restaurant choice for customers, is pressuring Domino's historical dominance, customer loyalty, and delivery margins and could further suppress same-store sales growth and overall earnings.
  
• Continued heavy reliance on promotional discounting in past years has trained customers to expect deals, making the current strategic move towards everyday value and fewer coupons risky; this could drive short
• to medium-term declines in transaction volumes and network sales, particularly if customers are slow to accept higher base prices.
  
• Store footprint saturation and recent cannibalization in mature markets such as Australia, New Zealand, and Japan, combined with a patchy record on international expansion and challenges in underperforming regions like France and Japan, threaten future same-store sales gains and may stagnate or even depress network-wide revenue.
  
• Rising labor and input costs, coupled with execution risk in streamlining cost structures and investing sufficiently in technology, could narrow operating and net profit margins if Domino's cannot match or outpace competitors in automation and operational efficiency, thus impacting long-term earnings growth.

Valuation

• The assumed bullish price target for Domino's Pizza Enterprises is A$33.62, which represents two standard deviations above the consensus price target of A$19.53. This valuation is based on what can be assumed as the expectations of Domino's Pizza Enterprises's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$41.0, and the most bearish reporting a price target of just A$13.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be A$2.8 billion, earnings will come to A$190.0 million, and it would be trading on a PE ratio of 23.9x, assuming you use a discount rate of 10.5%.
• Given the current share price of A$14.6, the bullish analyst price target of A$33.62 is 56.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.