Domino's Delivers a Q3 Beat—and a Recipe for a Rebound

Core Insights - Domino's Pizza delivered a strong Q3 performance, exceeding investor expectations and potentially increasing its stock price by 20% this year and 100% or more in the long term [3][5][9] Financial Performance - Revenue grew by 6.3%, driven by supply chain improvements, U.S. royalties, ad revenue, and higher market basket pricing, with U.S. comparable sales up by 5.2% and international sales up by 1.7% [6][7] - Income from operations increased by 11.8%, while net cash flow and free cash flow improved by 23% and 31% respectively, indicating a healthy capital return position [7] Capital Returns - The company is focused on aggressive capital returns, with a dividend yield of 1.7% and share buybacks reducing the share count by an average of 2.6% over the past year [4][6] - The dividend payout ratio was below 25% of free cash flow, allowing for ample cash for share repurchases and reinvestment [7] Valuation and Growth Outlook - Domino's trades at approximately 24 times its current-year earnings forecast, indicating significant growth potential compared to the broader market [4][5] - Analysts suggest that the stock is undervalued at 10 times earnings relative to the 2035 forecast, indicating a potential for a 100% stock price increase [5] Analyst Sentiment - The 12-month stock price forecast is $492.54, representing a 16.10% upside, with a moderate buy rating based on 26 analyst ratings [9][10] - Recent price target reductions have set the stage for a rebound, with a solid support base and strong institutional interest [10][11] Market Dynamics - The stock advanced 5% in premarket trading, confirming support at critical levels, which could lead to a rise to $500 if it surpasses resistance near $430 [11][12]