The most recent earnings announcement Domino’s Pizza, Inc.’s (NYSE:DPZ) released in December 2018 showed that the company experienced a robust tailwind, leading to a double-digit earnings growth of 30%. Below is a brief commentary on my key takeaways on how market analysts perceive Domino’s Pizza’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for this coming year seems rather muted, with earnings increasing by a single digit 8.2%. The growth outlook in the following year seems much more buoyant with rates generating double digit 23% compared to today’s earnings, and finally hitting US$498m by 2022.
Although it is useful to be aware of the growth each year relative to today’s figure, it may be more valuable to determine the rate at which the company is moving on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Domino’s Pizza’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 11%. This means that, we can anticipate Domino’s Pizza will grow its earnings by 11% every year for the next few years.
For Domino’s Pizza, I’ve compiled three key aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is DPZ worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether DPZ is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DPZ? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.