The Most Obvious Reason to Buy Domino's Pizza (DPZ) Stock Before It Reports Earnings on July 20 Is Hiding in Plain Sight
2026-07-16 12:31
•Selena Maranjian •The Motley Fool
•••• • Axe Capital view
Why Domino's Undervaluation Can't Be Ignored Before Earnings
Domino's Pizza trades cheap with strong cash returns and a modern sales model, making it worth watching ahead of earnings.
Domino's Pizza (DPZ) is trading at a forward price-to-earnings ratio of 16, well below its five-year average of 25. That suggests the market is missing something. Despite modest growth in store sales, Domino's has shifted smartly into digital channels, with 85% of U.S. sales online. Their steady dividend yield of 2.6% and substantial buybacks push total shareholder returns above 6%, hinting at confidence from inside the company. While South African investors can’t trade DPZ on the JSE, the global themes here are instructive: look for companies that combine cash returns with clear strategic adaptations. The usual risk is that Domino's digital bet could falter or consumer spending slows sharply in the U.S., which would hurt margins and returns. But right now, its shares look mispriced for a leader with a durable brand. this is just my opinion and not financial advice
For South African investors, keep an eye on USD/ZAR as a proxy for exposure to strong U.S. brands like Domino's. Avoid rushing in but consider partial positions if the rand strengthens, making U.S. stocks cheaper.
- USD/ZAR
- DPZ
- U.S. consumer spending slowdown
- Digital sales growth misses targets
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Domino's Pizza stock is trading at a forward P/E ratio of 16, well below its five-year average of 25, suggesting undervaluation. The world's largest pizza chain offers a 2.6% dividend yield (more than double the S&P 500's 1.1%) with a total shareholder yield of 6.1% when including buybacks. While growth is modest at 1% for comparable U.S. locations, the company is investing in digital sales which accounted for 85% of U.S. sales last year.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Selena Maranjian
Categories: Rates, Equities, Earnings, Capital Returns
Tickers: DPZ
Sentiment: Positive - Stock is undervalued with forward P/E of 16 versus five-year average of 25. Offers attractive dividend yield of 2.6% with consistent dividend growth over five years. Total shareholder yield of 6.1% including buybacks is compelling. Strong market position as world's largest pizza chain with 22,300+ locations. Digital sales strength at 85% of U.S. sales demonstrates modern business model adaptation.
Keywords: pizza chain, dividend yield, valuation, earnings report, digital sales, stock buybacks, shareholder returns
Insights:
- DPZ: Positive: Stock is undervalued with forward P/E of 16 versus five-year average of 25. Offers attractive dividend yield of 2.6% with consistent dividend growth over five years. Total shareholder yield of 6.1% including buybacks is compelling. Strong market position as world's largest pizza chain with 22,300+ locations. Digital sales strength at 85% of U.S. sales demonstrates modern business model adaptation.