The Motley Fool·2025-10-19 11:41Core Insights - Berkshire Hathaway has recently invested in Domino's Pizza, indicating potential for market-beating returns despite the competitive nature of the pizza industry [2][12] - Domino's has achieved over 6,500% in stock gains and dividends since its IPO in 2004, suggesting significant upside potential remains [3][12] Investment Rationale - Berkshire began acquiring Domino's shares in Q3 2024, increasing its position to over 2.6 million shares, representing approximately 7.75% of outstanding shares [5] - Domino's is the largest pizza chain globally, with 21,750 locations, which provides a competitive edge despite low barriers to entry in the pizza business [6] Competitive Advantages - The franchise model allows Domino's to expand with minimal capital while leveraging strong brand recognition [7] - A digital-first approach enhances customer ordering experience and optimizes delivery efficiency, supported by a robust supply chain that ensures consistent food quality [8] Financial Performance - For the first nine months of fiscal 2025, Domino's reported revenue of $3.4 billion, a 4% increase, while free cash flow surged 32% to $496 million [9] - The free cash flow comfortably covered $119 million in dividend costs, with a dividend yield of 1.6%, above the S&P 500 average of 1.2% [10] Valuation Metrics - Domino's P/E ratio stands at 25, below its five-year average of 30, indicating the stock is reasonably priced [11] - The consistent performance and dividend history suggest a stable investment opportunity for potential buyers [10][13]