Intrinsic value of Domino's Pizza Inc - DPZ

Previous Close

$282.61

  Intrinsic Value

$122.37

stock screener

  Rating & Target

str. sell

-57%

Previous close

$282.61

 
Intrinsic value

$122.37

 
Up/down potential

-57%

 
Rating

str. sell

We calculate the intrinsic value of DPZ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  21.40
  19.76
  18.28
  16.96
  15.76
  14.68
  13.72
  12.84
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
Revenue, $m
  4,168
  4,991
  5,904
  6,905
  7,993
  9,167
  10,424
  11,763
  13,181
  14,678
  16,251
  17,900
  19,624
  21,424
  23,298
  25,250
  27,280
  29,390
  31,583
  33,862
  36,230
  38,692
  41,251
  43,913
  46,683
  49,567
  52,571
  55,701
  58,964
  62,368
Variable operating expenses, $m
  1,524
  1,823
  2,155
  2,519
  2,915
  3,342
  3,799
  4,286
  4,802
  5,346
  5,911
  6,510
  7,137
  7,792
  8,474
  9,183
  9,922
  10,689
  11,487
  12,316
  13,177
  14,072
  15,003
  15,971
  16,979
  18,028
  19,120
  20,258
  21,445
  22,683
Fixed operating expenses, $m
  1,302
  1,331
  1,360
  1,390
  1,420
  1,452
  1,484
  1,516
  1,550
  1,584
  1,619
  1,654
  1,691
  1,728
  1,766
  1,805
  1,844
  1,885
  1,926
  1,969
  2,012
  2,056
  2,102
  2,148
  2,195
  2,243
  2,293
  2,343
  2,395
  2,447
Total operating expenses, $m
  2,826
  3,154
  3,515
  3,909
  4,335
  4,794
  5,283
  5,802
  6,352
  6,930
  7,530
  8,164
  8,828
  9,520
  10,240
  10,988
  11,766
  12,574
  13,413
  14,285
  15,189
  16,128
  17,105
  18,119
  19,174
  20,271
  21,413
  22,601
  23,840
  25,130
Operating income, $m
  1,342
  1,837
  2,389
  2,996
  3,658
  4,373
  5,141
  5,961
  6,830
  7,748
  8,722
  9,736
  10,796
  11,904
  13,059
  14,262
  15,514
  16,816
  18,170
  19,578
  21,041
  22,563
  24,147
  25,794
  27,510
  29,296
  31,158
  33,099
  35,124
  37,237
EBITDA, $m
  1,407
  1,914
  2,478
  3,098
  3,775
  4,507
  5,292
  6,130
  7,019
  7,957
  8,945
  9,981
  11,066
  12,198
  13,379
  14,609
  15,888
  17,219
  18,603
  20,042
  21,538
  23,094
  24,713
  26,397
  28,150
  29,977
  31,880
  33,864
  35,933
  38,093
Interest expense (income), $m
  105
  191
  31
  42
  53
  66
  80
  95
  111
  129
  147
  166
  186
  208
  230
  253
  277
  302
  328
  355
  383
  413
  443
  475
  508
  542
  577
  614
  653
  693
  735
Earnings before tax, $m
  1,151
  1,806
  2,347
  2,942
  3,591
  4,293
  5,046
  5,849
  6,701
  7,601
  8,556
  9,549
  10,589
  11,674
  12,806
  13,985
  15,212
  16,488
  17,815
  19,194
  20,629
  22,120
  23,672
  25,287
  26,968
  28,719
  30,544
  32,446
  34,431
  36,502
Tax expense, $m
  311
  488
  634
  794
  970
  1,159
  1,362
  1,579
  1,809
  2,052
  2,310
  2,578
  2,859
  3,152
  3,458
  3,776
  4,107
  4,452
  4,810
  5,182
  5,570
  5,972
  6,391
  6,827
  7,281
  7,754
  8,247
  8,761
  9,296
  9,856
Net income, $m
  840
  1,319
  1,713
  2,148
  2,622
  3,134
  3,684
  4,270
  4,892
  5,549
  6,246
  6,971
  7,730
  8,522
  9,349
  10,209
  11,105
  12,036
  13,005
  14,012
  15,059
  16,148
  17,281
  18,459
  19,687
  20,965
  22,297
  23,686
  25,135
  26,647

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,102
  1,319
  1,561
  1,825
  2,113
  2,423
  2,755
  3,109
  3,484
  3,880
  4,296
  4,732
  5,187
  5,663
  6,159
  6,675
  7,211
  7,769
  8,349
  8,951
  9,577
  10,228
  10,904
  11,608
  12,340
  13,103
  13,897
  14,724
  15,587
  16,486
Adjusted assets (=assets-cash), $m
  1,102
  1,319
  1,561
  1,825
  2,113
  2,423
  2,755
  3,109
  3,484
  3,880
  4,296
  4,732
  5,187
  5,663
  6,159
  6,675
  7,211
  7,769
  8,349
  8,951
  9,577
  10,228
  10,904
  11,608
  12,340
  13,103
  13,897
  14,724
  15,587
  16,486
Revenue / Adjusted assets
  3.782
  3.784
  3.782
  3.784
  3.783
  3.783
  3.784
  3.784
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
  3.783
Average production assets, $m
  292
  349
  413
  483
  560
  642
  730
  823
  923
  1,027
  1,138
  1,253
  1,374
  1,500
  1,631
  1,768
  1,910
  2,057
  2,211
  2,370
  2,536
  2,708
  2,888
  3,074
  3,268
  3,470
  3,680
  3,899
  4,127
  4,366
Working capital, $m
  38
  45
  53
  62
  72
  83
  94
  106
  119
  132
  146
  161
  177
  193
  210
  227
  246
  265
  284
  305
  326
  348
  371
  395
  420
  446
  473
  501
  531
  561
Total debt, $m
  576
  772
  989
  1,227
  1,486
  1,765
  2,064
  2,383
  2,720
  3,076
  3,451
  3,843
  4,253
  4,681
  5,127
  5,591
  6,074
  6,576
  7,098
  7,640
  8,204
  8,789
  9,398
  10,032
  10,691
  11,377
  12,091
  12,836
  13,612
  14,422
Total liabilities, $m
  992
  1,187
  1,405
  1,643
  1,902
  2,181
  2,480
  2,798
  3,136
  3,492
  3,866
  4,259
  4,669
  5,097
  5,543
  6,007
  6,490
  6,992
  7,514
  8,056
  8,619
  9,205
  9,814
  10,447
  11,106
  11,792
  12,507
  13,252
  14,028
  14,838
Total equity, $m
  110
  132
  156
  183
  211
  242
  276
  311
  348
  388
  430
  473
  519
  566
  616
  667
  721
  777
  835
  895
  958
  1,023
  1,090
  1,161
  1,234
  1,310
  1,390
  1,472
  1,559
  1,649
Total liabilities and equity, $m
  1,102
  1,319
  1,561
  1,826
  2,113
  2,423
  2,756
  3,109
  3,484
  3,880
  4,296
  4,732
  5,188
  5,663
  6,159
  6,674
  7,211
  7,769
  8,349
  8,951
  9,577
  10,228
  10,904
  11,608
  12,340
  13,102
  13,897
  14,724
  15,587
  16,487
Debt-to-equity ratio
  5.230
  5.850
  6.340
  6.720
  7.030
  7.280
  7.490
  7.660
  7.810
  7.930
  8.030
  8.120
  8.200
  8.270
  8.320
  8.380
  8.420
  8.460
  8.500
  8.540
  8.570
  8.590
  8.620
  8.640
  8.660
  8.680
  8.700
  8.720
  8.730
  8.750
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  840
  1,319
  1,713
  2,148
  2,622
  3,134
  3,684
  4,270
  4,892
  5,549
  6,246
  6,971
  7,730
  8,522
  9,349
  10,209
  11,105
  12,036
  13,005
  14,012
  15,059
  16,148
  17,281
  18,459
  19,687
  20,965
  22,297
  23,686
  25,135
  26,647
Depreciation, amort., depletion, $m
  65
  76
  89
  103
  118
  134
  151
  169
  189
  209
  223
  246
  269
  294
  320
  347
  374
  403
  433
  465
  497
  531
  566
  603
  641
  680
  722
  765
  809
  856
Funds from operations, $m
  906
  1,395
  1,802
  2,251
  2,739
  3,268
  3,835
  4,439
  5,081
  5,758
  6,469
  7,217
  7,999
  8,816
  9,668
  10,556
  11,479
  12,440
  13,438
  14,477
  15,556
  16,679
  17,847
  19,062
  20,327
  21,645
  23,019
  24,450
  25,944
  27,503
Change in working capital, $m
  7
  7
  8
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
Cash from operations, $m
  899
  1,388
  1,794
  2,242
  2,730
  3,257
  3,823
  4,427
  5,068
  5,745
  6,455
  7,202
  7,984
  8,800
  9,652
  10,538
  11,461
  12,421
  13,419
  14,456
  15,535
  16,657
  17,824
  19,038
  20,302
  21,619
  22,992
  24,422
  25,915
  27,472
Maintenance CAPEX, $m
  -47
  -57
  -69
  -81
  -95
  -110
  -126
  -143
  -161
  -181
  -201
  -223
  -246
  -269
  -294
  -320
  -347
  -374
  -403
  -433
  -465
  -497
  -531
  -566
  -603
  -641
  -680
  -722
  -765
  -809
New CAPEX, $m
  -53
  -58
  -64
  -70
  -76
  -82
  -88
  -94
  -99
  -105
  -110
  -115
  -121
  -126
  -131
  -137
  -142
  -148
  -154
  -160
  -166
  -172
  -179
  -186
  -194
  -202
  -210
  -219
  -228
  -238
Cash from investing activities, $m
  -100
  -115
  -133
  -151
  -171
  -192
  -214
  -237
  -260
  -286
  -311
  -338
  -367
  -395
  -425
  -457
  -489
  -522
  -557
  -593
  -631
  -669
  -710
  -752
  -797
  -843
  -890
  -941
  -993
  -1,047
Free cash flow, $m
  799
  1,273
  1,662
  2,090
  2,559
  3,065
  3,609
  4,190
  4,807
  5,459
  6,143
  6,863
  7,617
  8,405
  9,226
  10,082
  10,972
  11,899
  12,862
  13,863
  14,904
  15,987
  17,113
  18,286
  19,506
  20,777
  22,101
  23,482
  24,922
  26,424
Issuance/(repayment) of debt, $m
  -2,956
  196
  217
  238
  259
  279
  299
  319
  337
  356
  374
  392
  410
  428
  446
  464
  483
  502
  522
  542
  563
  586
  609
  633
  659
  686
  715
  745
  776
  810
Issuance/(repurchase) of shares, $m
  2,310
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -646
  196
  217
  238
  259
  279
  299
  319
  337
  356
  374
  392
  410
  428
  446
  464
  483
  502
  522
  542
  563
  586
  609
  633
  659
  686
  715
  745
  776
  810
Total cash flow (excl. dividends), $m
  153
  1,469
  1,879
  2,329
  2,817
  3,344
  3,908
  4,509
  5,145
  5,815
  6,517
  7,256
  8,027
  8,833
  9,672
  10,546
  11,455
  12,401
  13,383
  14,405
  15,468
  16,573
  17,722
  18,919
  20,165
  21,463
  22,816
  24,226
  25,698
  27,234
Retained Cash Flow (-), $m
  -3,150
  -22
  -24
  -26
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -83
  -86
  -90
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -2,997
  1,447
  1,855
  2,302
  2,789
  3,313
  3,875
  4,473
  5,107
  5,775
  6,476
  7,212
  7,982
  8,785
  9,623
  10,495
  11,402
  12,345
  13,325
  14,345
  15,405
  16,508
  17,655
  18,849
  20,092
  21,387
  22,736
  24,143
  25,612
  27,144
Discount rate, %
  14.10
  14.81
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
  50.13
  52.64
  55.27
  58.04
PV of cash for distribution, $m
  -2,627
  1,098
  1,202
  1,257
  1,264
  1,228
  1,154
  1,052
  930
  799
  666
  540
  424
  324
  240
  172
  119
  80
  52
  32
  19
  11
  6
  3
  2
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Domino's Pizza, Inc. is a pizza restaurant chain company. As of January 1, 2017, the Company operated in over 13,800 locations in over 85 markets around the world. The Company operates through three segments: domestic stores, international franchise and supply chain. Its basic menu features pizza products in various sizes and crust types. As of January 1, 2017, its Domestic Stores segment consisted primarily of its franchise operations, which consisted of 4,979 franchised stores located in the contiguous United States. As of January 1, 2017, its International Franchise segment consisted of a network of franchised stores in over 85 international markets. As of January 1, 2017, its supply chain segment operated 18 regional dough manufacturing and food supply chain centers in the United States, one thin crust manufacturing center, one vegetable processing center and one center providing equipment and supplies to certain of its domestic and international stores.

FINANCIAL RATIOS  of  Domino's Pizza Inc (DPZ)

Valuation Ratios
P/E Ratio 63.2
Price to Sales 5.5
Price to Book -7.2
Price to Tangible Book
Price to Cash Flow 47.4
Price to Free Cash Flow 59.6
Growth Rates
Sales Growth Rate 11.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.6
LT Debt to Equity -114.1%
Total Debt to Equity -116.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 37%
Ret/ On Assets - 3 Yr. Avg. 36.7%
Return On Total Capital 57.6%
Ret/ On T. Cap. - 3 Yr. Avg. 57.6%
Return On Equity -11.7%
Return On Equity - 3 Yr. Avg. -12.5%
Asset Turnover 3.3
Profitability Ratios
Gross Margin 31.1%
Gross Margin - 3 Yr. Avg. 30.6%
EBITDA Margin 19.7%
EBITDA Margin - 3 Yr. Avg. 19.2%
Operating Margin 18.4%
Oper. Margin - 3 Yr. Avg. 18%
Pre-Tax Margin 14%
Pre-Tax Margin - 3 Yr. Avg. 13.6%
Net Profit Margin 8.7%
Net Profit Margin - 3 Yr. Avg. 8.5%
Effective Tax Rate 37.7%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 34.4%

DPZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DPZ stock intrinsic value calculation we used $3433 million for the last fiscal year's total revenue generated by Domino's Pizza Inc. The default revenue input number comes from 0001 income statement of Domino's Pizza Inc. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DPZ stock valuation model: a) initial revenue growth rate of 21.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 14.1%, whose default value for DPZ is calculated based on our internal credit rating of Domino's Pizza Inc, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Domino's Pizza Inc.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DPZ stock the variable cost ratio is equal to 36.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1274 million in the base year in the intrinsic value calculation for DPZ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Domino's Pizza Inc.

Corporate tax rate of 27% is the nominal tax rate for Domino's Pizza Inc. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DPZ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DPZ are equal to 7%.

Life of production assets of 5.1 years is the average useful life of capital assets used in Domino's Pizza Inc operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DPZ is equal to 0.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-3039.921 million for Domino's Pizza Inc - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 41.061 million for Domino's Pizza Inc is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Domino's Pizza Inc at the current share price and the inputted number of shares is $11.6 billion.

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