The article highlights a potential buying opportunity in Domino's Pizza stock due to market inefficiencies. It argues that the stock's recent underperformance compared to Chipotle Mexican Grill, despite having a lower beta, suggests a mispricing. Furthermore, Domino's Pizza boasts a strong return on invested capital (ROIC) of over 61%, making it a potentially undervalued asset. Recent bullish signals from Wall Street analysts, including FMR LLC increasing its position and Loop Capital boosting its price target, further support the case for a Domino's Pizza investment.
Markets are very rarely efficient, and most hedge fund managers and investors throughout history have proven this. If markets were efficient, then no trader or investor would be able to outperform the market unless they had insane amounts of leverage or access to illegal insider information. That being said, there is a clear inefficiency in the consumer discretionary sector today, specifically in food and restaurant stocks.
Investors should take a deeper look at this inefficiency today and consider closing it down for their own portfolios in 2025 because these sorts of gaps don’t usually last long once the rest of the market—and Wall Street—gets a handle on them. will bring the prospect of a misprice to investors, one that Wall Street analysts will indeed become aware of in the coming months. Taking a look at the performance of can also bring additional evidence of this mispricing opportunity in the affordable food chains space.When analysts and portfolio managers at big banks and hedge funds manage their positions and ideas, they usually weigh the potential outcome in terms of beta. Beta is a measure that determines how volatile a stock is today compared to the S&P 500 index, so a higher beta (above 1.0) means a stock that is more volatile than the market. The opposite can be said for a beta measure below 1.0, meaning the stock is less volatile and safer than the broader market. With this in mind, investors can see how the differing price actions in these three stocks have failed the basic premise of professional money managers. With a low beta of 0.90, Domino’s Pizza stock has underperformed Chipotle Mexican Grill stock over the past 12 months by as much as 27%. Yet, considering that Chipotle has a significantly higher beta of 1.3, recent pullbacks in the S&P 500 shouldn’t have been harsher on Domino’s Pizza stock. While Chipotle stock trades at 85% of its 52-week high, which is considered bullish territory, Domino’s Pizza stock has fallen to only 72% of its 52-week high, which is conversely bearish territory for the company. It almost seems like the heavy underperformance in Papa John’s stock might have dragged Domino’s Pizza down by association, and if that’s the case, then investors should get excited.Of course, it is a correlation selloff because neither the beta nor the fundamentals between Domino’s Pizza stock and Papa John’s would suggest that Domino’s should be trading this low compared to its 52-week high price. There is one main difference maker in the stock, a financial metric, that investors should be aware of in Domino’s Pizza stock today. That metric is the return on invested capital (ROIC) rate, which is responsible for compounding itself and creating the sort of “I wish I had bought'reaction when investors look at a stock’s long-term price chart. With an ROIC of over 61%, Domino’s Pizza sock fits that description perfectly. Compared to Papa John’s ROIC of roughly 31%, it would seem that a correlation selloff might not be justified after all. Recently, some on Wall Street have become aware of this inefficiency and decided to take matters into their own hands, such as those from FMR LLC, who boosted their positions in the company by 16.3% as of November 2024. This new allocation would net their position at a high of $941.9 million today, or 6.3% ownership in the company. Acting as another bullish gauge for investors to consider Domino’s Pizza a potential buy in this recent pullback, there’s also much more evidence to keep track of. Analysts from Loop Capital also held a Buy rating on the company as of November 2024, this time boosting their valuations to a high of $559 a share to call for a net upside of 35.4% from where the stock trades today. This bold call is not only born out of the inefficiencies pointed out above but also from the stock’s outstanding discount. Compared to the retail sector’s average 98.4x price-to-earnings (P/E) valuation, Domino’s Pizza offers a significant discount through its 25.4x multiple today, which is also severely compressed compared to its long-term average valuation of 35.0x
DOMINO's PIZZA STOCK MARKET INVESTMENT OPPORTUNITY MARKET INEFFICENCIES BETA RETURN ON INVESTED CAPITAL (ROIC) WALL STREET ANALYSTS
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Ooni Pizza Ovens: More Than Just PizzaOoni pizza ovens are renowned for their exceptional performance in baking pizzas, both indoors and outdoors. However, these versatile cooking appliances can be used for a wide range of culinary creations beyond pizza. From roasting meats and vegetables to smoking steaks, Ooni offers a variety of accessories and features that enhance its functionality.
Read more »
Pizza Perfection: A Day at Una Pizza NapoletanaBon Appétit spends a day with Chef Anthony Mangieri, owner of Una Pizza Napoletana in NYC, considered a pioneer of Neapolitan-style pizza in America. Mangieri discusses his dedication to the craft, his unique pizza-making style, and the physical demands of his work.
Read more »
Potential financial risks as more consumers turn to 'Buy Now, Pay Later' programsAccording to data firm Adobe Analytics, more consumers are opting to use Buy Now, Pay Later programs.
Read more »
Shiba Inu (SHIB) Sees Buy Signal, Potential for 25% ReboundShiba Inu's largest native token, SHIB, has presented a buy signal according to crypto analyst Ali Martinez, suggesting a potential 25% rebound to $0.000029. Despite failing to reach a new all-time high and experiencing a significant decline since December 8th, SHIB has shown signs of recovery and may capitalize on the recent buy signals observed in other assets.
Read more »
Redburn Atlantic Upgrades Disney to Buy, Sees 32% Upside PotentialInvestment firm Redburn Atlantic upgrades Walt Disney shares to buy, citing a major inflection point for the company and a 32% upside potential for the stock.
Read more »
TD Cowen Upgrades American Airlines to Buy, Citing Strong Tailwinds and Upside PotentialTD Cowen analyst Tom Fitzgerald upgraded shares of American Airlines to buy from hold, citing improved pricing, a return of business travel, and better economics from airline credit cards as tailwinds. Fitzgerald increased his price target by $8 to $25, suggesting a potential 47.3% surge from Friday's closing level. He believes consensus estimates are too low and that American Airlines is positioned for stronger performance in 2025.
Read more »