Aug 18, 2020
Should You Invest in Domino’s Pizza?
OVERVIEW
Domino’s Pizza Incorporation manages and operates restaurant chains around the world. They run over 17000 stores in several different countries offering a diverse range of products to their consumers.
Why You Should?
- The COVID-19 Pandemic has benefited the restaurant chain as consumers look for consistent and safe food that can be delivered. Domino’s Pizza also has a great contactless pickup option for its consumers around the world. The company reports rising sales numbers due to this when other competitors are filing for bankruptcy as in-store dining becomes a thing of the past.
- The company offers a wide range of products to its consumers. From several different types of pizza, it also offers chicken wings, desserts, and sandwiches. This will benefit the company in the long term as consumers will have more options and will tend to spend more.
- The company innovates around its product to offer a seamless and uniform experience for its customers no matter the country that they are in. With the modern Domino’s app and website, the company has seen a higher percentage of their orders come from these venues instead of in-store purchasing. This benefits the company as they see a higher percentage of returning customers.
- Domino’s Pizza has reported strong growth. The company reports rising sales during and before a pandemic and has also been expanding its footprint in several countries like India and Mexico. This allows it to gain a stronger customer base in these parts which benefits the company with rising revenues and profits. The company has also seen rising profits and revenues over the last couple of financial years. In the financial year of 2019, the company reported revenues of 3.43 billion and profits of around 362 million. Both of these metrics are better than what the company had reported in the financial year of 2018 when the company reported revenues of around 2.8 billion and profits of 280 million.
Why You Should Not?
1. Domino’s pizza still faces competition from both large and small players in the restaurant business. McDonald’s, Papa Johns, YUM Brands (Owner of Pizza Hut), and other small businesses may slightly slow future growth for the company.
2. The COVID-19 Pandemic has increased operating costs for the company. This might hurt short-term financial results.
3. Trade tensions between the United States and other countries might hurt the price of ingredients and other products for Domino’s. It might also hurt their future store openings. This will hurt the company in the long-term as uncertainty around operating costs causes a risky environment.
4. Domino’s Pizza is still a risky investment as it trades over 34 times earnings. This metric causes it to be a substantially more volatile investment compared to other options.
MY OPINION
In my opinion, I think that the pros outweigh the cons for Domino’s Pizza. The company has strong growth and continuously innovates to further streamline its customer experience. However, Domino’s is still a volatile investment and competition can hurt the company in the future.
