Domino's Pizza Could Still Be Cheap Here and Shorting OTM Puts Works

Core Viewpoint - Domino's Pizza (DPZ) stock is currently trading over 14% below the target price of $498, indicating potential for price appreciation through short-selling out-of-the-money (OTM) put options [1][7]. Financial Performance - Domino's reported a strong Q3 performance with a free cash flow (FCF) margin of 14.56%, up from 11.5% a year ago [4]. - Projected free cash flow for the next 12 months is estimated at $755 million [4]. Market Valuation - Using a 4.50% FCF yield metric, the projected market value of Domino's is $16.777 billion, suggesting a potential increase of 13.47% from the current market cap of $14.786 billion [5]. - This valuation implies a potential share price of $493.92 based on current trading at $435.31 [5]. Analyst Consensus - Analysts have a favorable outlook on DPZ, with an average price target of $496.65 from 34 analysts and a mean survey price target of $500.53 from Barchart [6]. - AnaChart.com reports an average price target of $493.53 from 22 analysts, reinforcing the positive sentiment [6]. Options Strategy - The $420.00 strike price put option expiring on January 16, 2026, offers a midpoint premium of $6.05, providing a yield of 1.44% [8].