To The Moon

$Domino's Pizza(DPZ)$

Domino’s Pizza (NYSE: DPZ) is set to report its quarterly financial results before U.S. markets open on July 21, 2025. Naturally, many investors have been asking: Should I buy Domino’s stock ahead of the earnings announcement?

In this article, I’ll answer that question directly and explain why my recommendation on Domino’s has changed. I’ll preview what investors should watch for in the upcoming results, review the company’s most recent quarterly performance, assess key tailwinds and headwinds, and share my updated discounted cash flow (DCF) valuation model and intrinsic value estimate for Domino’s stock. Let’s dive in.

Reviewing the Most Recent Quarterly Results

Domino’s last reported earnings on April 28, 2025, posting global retail sales growth of 4.7%.

Domino’s operates on a franchise-based model, owning a small portion of stores but franchising the vast majority. Global retail sales reflect the total sales across all Domino’s locations — not revenue to Domino’s directly, but a measure of system-wide demand.

The 4.7% growth figure was solid, though below the company’s longer-term average of 6–8% from the previous decade. This slowdown partly reflects store closures in the quarter: net global store count declined by eight locations, including 17 new U.S. openings but 25 international closures.

Management reiterated its long-term “Hungry for More” strategy to drive higher sales, store count, and profits, but acknowledged ongoing macroeconomic challenges.

Key Headwinds: Slowing Same-Store Sales and International Closures

One area of concern is U.S. same-store sales growth, which fell by 0.5% year-over-year — a sharp contrast to the 5.6% increase in the same quarter last year. Same-store sales reflect organic growth by measuring sales at stores open at least 12 months, excluding the impact of new openings and closures.

Internationally, Domino’s closed a net 25 stores in Q1 2025, largely driven by 228 closures versus 203 openings abroad. These appear to be more relocations and portfolio reshuffling than outright exits, but the scale of closures raises questions about execution in certain markets.

On a trailing 12-month basis, however, Domino’s still managed to expand its global footprint by 603 locations, bringing its total to 21,358 stores worldwide — far below McDonald’s and Starbucks, which each operate closer to 40,000 locations, suggesting room for continued expansion.

Strengths of the Franchise Model and Cash Flow

One of Domino’s most attractive qualities remains its asset-light franchise model. Franchisees provide the capital and operate the stores, while Domino’s collects royalties and supports them with branding and operational expertise.

This approach allows Domino’s to expand with minimal capital expenditure, supporting robust free cash flow.

For Q1 2025, cash flow from operations surged 45% to $179 million, with free cash flow reaching $164 million. Capital expenditures consumed less than 10% of operating cash flow — a testament to the efficiency of the model.

Tariff Impact on Domino’s Pizza

Indirect Risks Exist

While direct exposure to tariffs is minimal, some indirect risks could emerge over time:

• Equipment and packaging costs: Higher tariffs on imported kitchen equipment, packaging materials, or other capital goods could marginally increase costs for franchisees.

• Consumer demand: Broader trade tensions and resulting economic uncertainty could weigh on consumer confidence and discretionary spending, indirectly affecting same-store sales.

These risks, however, remain secondary and relatively muted compared to other macroeconomic factors.

Competitive Advantage Maintained

Domino’s asset-light franchise model and efficient domestic supply chain position it favorably relative to peers in the restaurant industry. Even in the event of new or heightened tariffs, the company is well positioned to maintain competitive pricing and healthy margins.

Valuation: My Updated Intrinsic Value Estimate

Now to the key question: Is Domino’s stock undervalued, fairly valued, or overvalued today?

I’ve updated my proprietary discounted cash flow model, which values Domino’s at an intrinsic value of $291 per share. With the stock currently trading around $466, it appears significantly overvalued on a DCF basis.

However, other metrics are more forgiving. The forward P/E ratio, at about 26x, is near its lowest level since early 2022, suggesting the stock is not egregiously overvalued compared to recent history.

Reconciling these two perspectives, I conclude that Domino’s is slightly overvalued at current prices. While its franchise model supports sustainable cash flow, the stock’s premium valuation leaves little margin of safety — especially with U.S. sales growth stagnating and international execution uneven.

Competitive Landscape and Other Risks

The competitive environment for Domino’s has changed markedly in the last decade. Food delivery platforms such as Uber Eats and DoorDash have enabled nearly every restaurant to offer home delivery, increasing competition for Domino’s in its core business.

Additionally, these platforms compete for delivery workers, offering more flexibility and autonomy than Domino’s can — making it harder for the company to attract and retain drivers.

That said, Domino’s still enjoys one of the best customer value propositions in quick-service restaurants, with aggressively priced carry-out and delivery deals that are hard for competitors to match. This value orientation remains one of its greatest competitive advantages.

My Updated Recommendation

At the beginning of 2025, I rated Domino’s as a borderline Buy, leaning toward bullishness given its dependable cash flow and growth potential.

Year-to-date, the stock has risen 11%, validating that cautious optimism. However, given the stock’s stretch in valuation, slowing U.S. same-store sales, rising international uncertainty, and increased competition, I am downgrading Domino’s stock to a Hold as of July 11, 2025.

Verdict: Hold

After reviewing Domino’s fundamentals, valuation metrics, and near-term risks, my updated recommendation on Domino’s stock as of July 11, 2025, is Hold.

While the company’s franchise model, strong free cash flow, and customer value proposition remain long-term strengths, the stock is currently trading at a significant premium to intrinsic value, and U.S. same-store sales growth has slowed. With the stock already up double-digits year-to-date, the risk/reward balance at current levels does not justify adding to or initiating a new position ahead of earnings.

Investors should wait for a more attractive entry point.

Intrinsic Value: $291 per share

My updated proprietary discounted cash flow (DCF) model values Domino’s at approximately $291 per share. This reflects conservative assumptions about store growth, modest improvements in same-store sales, and continued strong free cash flow conversion.

Suggested Entry Price Range: $300–$320 per share

Given the quality of the business and its long-term track record, I would consider Domino’s attractive for long-term investors in the range of $300–$320 per share, which allows for a reasonable margin of safety versus intrinsic value and reflects a forward P/E in line with its 10-year average.

At the current market price of ~$466, Domino’s appears meaningfully overvalued.

Summary Table of Valuation & Recommendation

Based on my analysis, the stock would become attractive again closer to the $300–$320 range, which would provide a reasonable margin of safety relative to intrinsic value while still rewarding long-term growth potential.

Final Thoughts

Domino’s remains one of the most impressive examples of a scalable, cash-generating franchise business in the restaurant industry. Its model is durable, and its value proposition for customers remains compelling.

However, at current prices, the risk/reward profile has shifted unfavorably. Investors should resist the temptation to chase the stock into earnings and instead wait for a better entry point.

Earnings on July 21 could provide additional insights into how management is navigating these challenges — and potentially present a buying opportunity if the stock pulls back.

Until then, patience is warranted. As always, focus on the long-term fundamentals — and don’t let short-term earnings noise drive your investment decisions.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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