Domino’s Pizza: A Stagnant Stock? Time to Consider?

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After a period of notable success in the 2010s, Domino’s Pizza (DPZ) has demonstrated little progress over the past five years, leaving investors in a state of mild disappointment. Including dividends, the pizza delivery specialist’s five-year total return, when measured against the inflationary tide, appears scarcely more than a trifling sum. This modest performance, though, is not without its nuances, for the underlying enterprise has continued to expand its reach, refine its brand, and adapt to the evolving preferences of its clientele. The question for discerning investors is whether these incremental improvements might yet transform a stagnant stock into a proposition worthy of consideration.

There are, to be sure, signs of a more vigorous spirit. Domino’s commenced 2025 with subdued U.S. trends, yet posted a more satisfactory second quarter, buoyed by product innovations, broader distribution on delivery platforms, and steady international expansion. This improved cadence, though modest, offers a glimmer of hope for the remainder of the year. Yet, given the current valuation, it is doubtful that mere improvement will suffice to render the shares irresistibly attractive.

The Revival of Momentum

The most recent quarter reveals progress in two critical domains: sales and operations. In the second quarter of 2025, Domino’s reported U.S. same-store sales growth of 3.4%, with international comparisons rising 2.4% (currency-neutral). Total revenue ascended 4.3% to approximately $1.15 billion, and income from operations increased nearly 15%, bolstered by robust franchise royalties and supply chain efficiency. Management also highlighted favorable unit economics and vigorous advertising support, as the company achieved full integration with the two largest delivery aggregators and expanded its menu, including the introduction of stuffed crust.

“In the U.S., both delivery and carryout grew, driving meaningful market share gains,” remarked Domino’s CEO Russell Weiner, who added that the business is “well-positioned” with an array of tools to foster long-term value. The recovery followed a turbulent first quarter, during which U.S. comparisons dipped 0.5% and the system experienced a slight net store decline, driven by international closures. Yet, international comparisons still rose 3.7% (currency-neutral), and growth in franchise royalties and supply chain revenue supported the top line. The sequential improvement from Q1 to Q2-both in comparisons and operating income-suggests that promotional strategies, menu innovations, and aggregator awareness are gaining traction.

Looking ahead, two strategic levers appear resilient. First, access via third-party apps broadens the customer base while preserving the core digital infrastructure for loyal patrons. Management now enjoys the full-scale presence of both Uber’s (UBER) Uber Eats and DoorDash’s (DASH) services. Second, value and innovation continue to attract traffic; enhancements to the rewards program and offerings such as parmesan-stuffed crust provide the brand with fresh reasons to remain in the consideration set without relying solely on price. These moves contributed to a positive turn in delivery comparisons during Q2.

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Valuation and Perils

Despite commendable underlying performance and a pronounced underperformance of the stock over the last five years, Domino’s remains an uncertain proposition. As of this writing, the stock carries a price-to-earnings ratio of approximately 25-roughly in line with its historical average. While 25 is not exorbitant for a high-return, asset-light franchisor, it does temper potential gains should growth decelerate or margins contract.

Further, several key risks persist. Cost inputs and store-level labor, for instance, may pressure company-owned store margins. Indeed, this critical profitability metric declined by two full percentage points year-over-year in Q2. Additionally, international expansion-a major catalyst for the company in recent decades-has encountered pockets of volatility, including net closures earlier this year. Lastly, while aggregators enhance reach, they may complicate ticket dynamics and the customer experience if not managed with care. These challenges, though not novel, help explain why a price-to-earnings ratio of 25 may not be considered a bargain.

Thus, is it finally time to invest? The case hinges on steady mid-single-digit same-store growth, continued net unit additions, and operating-income expansion as supply chain and franchise royalty revenues grow with retail sales. If Domino’s can sustain the Q2 trajectory-positive delivery and carryout comparisons, healthy international trends, and incremental traffic from aggregators-the current mid-20s price-to-earnings ratio may prove reasonable. However, if momentum wanes toward flat U.S. comparisons or international volatility intensifies, that valuation could appear overpriced.

For investors intrigued by the stock, despite its risks, a measured approach is prudent. With improving trends, Domino’s appears a decent stock idea-though not a clear bargain. A small initial position, with an eye toward adding on market or company-specific pullbacks, could be a sensible way to participate while allowing the narrative room to demonstrate its potential for renewed growth.

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2025-09-30 04:34