We think shares of Domino’s Pizza (DPZ) look overvalued at their current price level, especially after the company reported a same-store sales decline for the last quarter. Therefore, we think it is better to bet on Yum! Brands (NYSE:YUM), Papa John’s (PZZA), and Rave Restaurant Group (RAVE), which are well-positioned to capitalize on the industry tailwinds. Read on.The largest pizza restaurant chain operator, Domino’s Pizza, Inc. (DPZ), which is headquartered in Ann Arbor, Mich., boasts roughly 18,300 stores across more than 90 markets. Its shares have gained 27.4% in price over the past nine months to close yesterday’s trading session at $480.27. However, the stock is currently trading 12.5% below its 52-week high of $548.72, which it hit on July 22, 2021. Also, the stock has lost 10.7% in price over the past three months.
DPZ’s revenue increased 3.1% year-over-year to $997.99 million for its fiscal third quarter, ended September 12, 2021, and its net income came in at $120.40 million, up 21.5% year-over-year. However, its same-store sales fell for the first time in more than a decade. The stock is also trading at an expensive valuation. In terms of forward EV/S, DPZ’s 4.99x is 248.2% higher than the 1.43x industry average. In addition, the stock’s 3.97x forward P/S is 226.9% higher than the 1.22x industry average. So, it could be wise to wait for a better entry point in the stock.
Nevertheless, the rapid rate of vaccinations and an increase in consumer discretionary spending should drive the demand for pizza restaurants. According to a Business Wire research report, the global pizza market is expected to reach $233 billion in 2023. Therefore, instead of betting on DPZ, we think it could be wise to bet on better-positioned pizza stocks Yum! Brands, Inc. (YUM), Papa John’s International, Inc. (PZZA), and Rave Restaurant Group, Inc. (RAVE). They are well-positioned to capitalize on the industry tailwinds.