Domino’s Fails to Deliver with Soft Q4 Results

Domino’s Pizza, Inc. (NYSE:DPZ) released its quarterly earnings on Thursday which failed to impress investors as the stock was down over 9% in trading.

Let’s take a closer look to see what drove the sell-off and whether it could be a good buy on the dip.

Domino’s continued to expand its locations with a net 560 stores added during Q4. But it was existing stores that were the problem as same-store sales grew by just 5.6%, compared to 6.9% that analysts were expecting. While sales did continue to grow, the company’s sales of $1.08 billion came in just under estimates of $1.1 billion. Per-share earnings of $2.62 also were below forecasts of $2.69.

There was, however, good news for dividend investors as the company announced that it would be hiking its payouts by 18%. But at 65 cents, the quarterly payouts still equate to a dividend yield of only 1%.

Overall, there’s not a lot to be excited from these results and while the same-store growth might be better than what you’d expect from a regular retailer, it’s still hard to justify paying a premium for the stock. Domino’s has been trading at around 30 times earnings, which is a hefty price tag for a company operating in a very saturated and competitive industry.

With growth slowing down, a small dividend and the stock trading at a high multiple, it’s hard to see Domino’s as a good buy today. And there’s not much moat that the company can bank on that would make it a good long-term buy. There are simply better opportunities out there for investors looking for growth or dividends.