At US$422, Is It Time To Put Domino's Pizza, Inc. (NYSE:DPZ) On Your Watch List?

Domino's Pizza, Inc. (NYSE:DPZ) led the NYSE gainers with a relatively large price hike in the past couple of weeks. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Domino's Pizza’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Domino's Pizza

Is Domino's Pizza Still Cheap?

According to our valuation model, the stock is currently overvalued by about 32%, trading at US$422 compared to our intrinsic value of $319.93. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Domino's Pizza’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Domino's Pizza generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Domino's Pizza's earnings over the next few years are expected to increase by 24%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? DPZ’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DPZ should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DPZ for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for DPZ, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Domino's Pizza as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Domino's Pizza you should know about.

If you are no longer interested in Domino's Pizza, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.