Corporate Valuation - Domino's Pizza

Extract

[...] Corporate Valuation - Domino's Pizza Rating: BUY KEY POINTS Growth: Earnings are growing steadily, despite COVID19 crisis, lockdowns, and inflation tendencies. They also are expected to continue growing at pace of approx over the next few years. Earnings growth is much higher than savings interest rates, which makes the company interesting to watch. Net cashflows from operating are also growing steadily, with an increase over the last 3 years. Market share: Domino's Pizza is the world leader in terms of pizza chain operator, and one of the world leaders of quick service restaurant market. [...]

[...] The industry is threatened, though, by strong inflation currently happening in most of the developed countries. People tend to reduce their "out-of-home" consumption, as well as their leisure food consumption, when finance is tight. This could be a strong threat for the fast-food industry. However, prices have been kept at a reasonable level by Domino's over the last few years, and people tend to still want to enjoy a pizza on some occasions. The industry is facing some difficulties in terms of labor, where a wide shortage currently is happening. [...]

[...] The company's history started in the 60's in the USA, and the group initially remained focused on this market. International development started in the 80's in Canada, shortly followed by Japan. India has then been a massive growth market for Domino's pizza. The country now is the second country in the world in terms of stores number, with more than 1500 stores. In the recent years, Domino's has continued to develop his international presence, with opening in Uruguay in November 2022 for example. The only (though major) downturn they recently have faced is on the Italian market. [...]

[...] Domino's pizza group is based on franchise system. They have created a worldwide retail system, with one company per country. Some franchises, though, are covering several countries and can be related to wider areas. M&A ACTIVITIES Domino's continue its national (USA) and international development. The group has namely announced its willingness to open 10 stores in Montevideo, Uruguay, in the next year or so, following the first opening in this city earlier in November 2022. No big M&A is on-going with Domino's so far in terms of food itself, but they keep concluding spot partnerships linked to their activities. [...]

[...] The group is partially exposed to variable rates and therefore could be at risk in such an economical context. The group indebtness level is very high and free cashflows are not sufficient to cover the group debt, which could be a major concern from the shareholders point of view. PORTER ANALYSIS Porter analysis is a strategic analysis aiming at defining the level of competition acting on a specific market or on a specific group. The main criteria for this analysis are: Competition in the industry: This is very high. [...]