Taking a closer look at DPZ's valuation and fundamentals
Domino's Pizza, Inc. (NYSE:DPZ) is the largest pizza company in the world, based on retail sales. The stock is up 34.5% in 2021 and 29.3% year-over-year. After its post-earnings bull gap on July 22, the shares soared to a record high of $548.72. And while DPZ has shed 3.2% in the last week, the pullback has been contained by its ascending 30-day moving average, a trendline that hasn't been breached on a closing basis since March 12.
Despite the steady uptrend, many in the analyst community remain on the sidelines. Of the 21 brokerages covering DPZ, 13 maintain a tepid "hold" stance. This leaves the stock ripe for upgrades that could keep its chart ascension going. To further hammer that point home, DPZ's 12-month consensus price target of $534.67 is just a slim 3.5% premium to its current perch.
From a fundamental perspective, Domino's Pizza has performed amazingly in recent years, experiencing strong and consistent growth on its top- and bottom-lines. DPZ’s revenues are up by 56% and their net income has grown by 75% since fiscal 2017, which has pushed the stock to new all-time highs in 2021. However, Domino’s stock growth has outpaced the rate at which their business is expanding. As a result, DPZ has a very high price-earnings ratio of 41.64 and a forward price-earnings ratio of 38.61, meaning Domino's stock has already priced in years of future growth. Overall, Domino’s stock is best suited for long-term investors with a 5-year or longer outlook.