Domino's (DPZ)

Fast-food pizza chain Domino’s (NYSE:DPZ) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 6.2% year on year to $1.15 billion. Its GAAP profit of $4.08 per share was 3.1% above analysts’ consensus estimates.

Company Overview

Founded by two brothers in Michigan, Domino’s (NYSE:DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Fast-food pizza competitors include public companies Papa John’s (NASDAQ:PZZA) and Pizza Hut (owned by Yum! Brands, NYSE:YUM) as well as private company Little Caesars.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $4.85 billion in revenue over the past 12 months, Domino's is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions. However, its scale is a double-edged sword because there are only a finite of number places to build restaurants, making it harder to find incremental growth. For Domino's to boost its sales, it likely needs to adjust its prices, launch new chains, or lean into foreign markets.

As you can see below, Domino’s sales grew at a tepid 5.3% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new restaurants and increased sales at existing, established dining locations.

This quarter, Domino's reported year-on-year revenue growth of 6.2%, and its $1.15 billion of revenue exceeded Wall Street’s estimates by 0.9%.

Looking ahead, sell-side analysts expect revenue to grow 5.5% over the next 12 months, similar to its six-year rate. This projection is underwhelming and indicates its newer menu offerings will not catalyze better top-line performance yet.

Number of Restaurants

Domino's operated 21,750 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 3.5% annual growth, much faster than the broader restaurant sector. Furthermore, one dynamic making expansion more seamless is the company’s franchise model, where franchisees are primarily responsible for opening new restaurants while Domino's provides support.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.

Domino’s demand has been healthy for a restaurant chain over the last two years. On average, the company has grown its same-store sales by a robust 2.7% per year. This performance suggests its rollout of new restaurants could be beneficial for shareholders. When a chain has demand, more locations should help it reach more customers and boost revenue growth.

In the latest quarter, Domino’s same-store sales rose 5.2% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

Domino’s unit economics are higher than the typical restaurant company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 28.6% gross margin over the last two years. Said differently, Domino's paid its suppliers $71.45 for every $100 in revenue.

Domino's produced a 28.6% gross profit margin in Q3, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as ingredients and transportation expenses) have been stable and it isn’t under pressure to lower prices.

Domino’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 18.9% over the last two years. This profitability was top-notch for a restaurant business, showing it’s an well-run company with an efficient cost structure.

Analyzing the trend in its profitability, Domino’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Domino's generated an operating margin profit margin of 19.5%, up 1 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Domino’s EPS grew at a decent 11.2% compounded annual growth rate over the last six years, higher than its 5.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q3, Domino's reported EPS of $4.08, down from $4.19 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.1%. Over the next 12 months, Wall Street expects Domino’s full-year EPS of $17.11 to grow 9.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Domino's has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.9% over the last two years, quite impressive for a restaurant business.

Taking a step back, we can see that Domino’s margin expanded by 2.3 percentage points over the last year. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.

Domino’s free cash flow clocked in at $164 million in Q3, equivalent to a 14.3% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Domino's hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 91.8%, splendid for a restaurant business.

Domino's reported $139.7 million of cash and $5.05 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.03 billion of EBITDA over the last 12 months, we view Domino’s 4.8× net-debt-to-EBITDA ratio as safe. We also see its $179.3 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Domino's blew past analysts’ EBITDA expectations this quarter. We were also excited its same-store sales outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.4% to $426.40 immediately after reporting.

Updated: December 4, 2025 at 9:41 PM EST

When considering an investment in Domino's, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Domino's is a fine business. Although its revenue growth was a little slower over the last six years, its new restaurant openings have increased its brand equity. And while its projected EPS for the next year is lacking, its stellar ROIC suggests it has been a well-run company historically.

Domino’s P/E ratio based on the next 12 months is 23x. At this valuation, there’s a lot of good news priced in. This is a good one to add to your watchlist - there are better opportunities elsewhere at the moment.

Wall Street analysts have a consensus one-year price target of $496.65 on the company (compared to the current share price of $427.25).