Domino's Stunning Stock Performance


Published:

In 2008, if you gave 100 people $1,000 each to invest in a restaurant stock, perhaps one would have chosen Ann Arbor-based Domino’s Pizza, and for good reason. People had seemingly grown tired of pizza, particularly Domino’s variety. Its stock struggled to break $3 a share, and had been languishing for years.

But today, few if any of those 100 people would have more money than that lone Domino’s investor. The pizza chain’s stock has been on a remarkably steady run that has rewarded investors like few other restaurant chains in recent years.

Consider this: that lone Domino’s investor today would have $15,877.13—basically, a 1,500-percent increase in just four years.

To be sure, lots of restaurants could boast strong returns from those dark days in late 2008 when the stock market was depressed and people were putting their money under their beds. Still, even with that backdrop Domino’s performance sticks out. Its 37-percent stock increase last year was its worst performing year since then. And not even Chipotle can boast the returns Domino’s stock has provided. If someone put $1,000 into Chipotle in December 2008 he’d have $6,527.28. If that investor had the wisdom to sell when the stock reached its all-time high of $442 a share, he’d have $9,695.38, a return of 870 percent. But not Domino’s.

All of this has come from a chain that isn’t growing domestic unit count at all. The increase has come thanks to a series of moves that have quietly overhauled the brand, including the remake of its pizza recipe followed by the introduction of a bunch of new products and a brilliant marketing campaign in which it admitted that its previous product stunk. The company has maintained strong sales growth performance. It has adopted the use of technology, and it has grown rapidly in international markets—its international unit count now exceeds its domestic count. Its international same-store sales have grown 75 straight quarters. It also has a high-leverage, franchising-focused business model that uses cash to buy back shares and pay out dividends, which investors love.

Still, few people saw this coming. We’ve polled analysts on their stock picks every year, and not a single analyst picked Domino’s during that four-year run. Until this month, that is.

 

Edit ModuleShow Tags
Edit Module