DPZ 489.01 (+1.24%)
US25754A2015RestaurantsRestaurants

Last update on 2024-06-06

Dominos Pizza (DPZ) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Domino's Pizza (DPZ) excels with a Piotroski F-Score of 8/9 in 2023. Comprehensive financial analysis indicates strong performance and growth potential.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Dominos Pizza (DPZ) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a measure used to assess a company's financial health, ranging between 0 and 9. A score of 8 indicates a strong financial position. Domino's Pizza (DPZ) was evaluated using this score based on criteria such as profitability, liquidity, and operational efficiency. Highlights include: positive net income, strong cash flow from operations, improved return on assets, and a high current ratio. However, there are concerns with a slight increase in leverage and a small dip in asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Given Domino's Pizza's high Piotroski F-Score of 8 and the overall positive financial indicators, it seems to be a strong and potentially undervalued investment. Investors may want to look further into this stock, considering its robust profitability, cash flow, and liquidity. However, it's important to watch for the increase in leverage and the decrease in asset turnover efficiency.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Dominos Pizza (DPZ)

Company has a positive net income?

Whether the net income is positive or negative in the most recent fiscal year.

Historical Net Income of Dominos Pizza (DPZ)

Domino's Pizza reported a net income of $519,118,000 in 2023, showing a positive trend (add 1 point). This is a notable increase from the previous year's net income of $452,263,000. Evaluating historical data, Domino's has demonstrated consistent profit growth over the past two decades, except for minor dips which were successfully overcome in subsequent years. The positive net income, up from $390,370 in 2003, indicates robust financial health and an enduring ability to generate profits—a key component in the Piotroski Score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses whether a company’s core business operations are generating enough cash to sustain and grow without the need for external financing.

Historical Operating Cash Flow of Dominos Pizza (DPZ)

In 2023, the Cash Flow from Operations (CFO) for Domino’s Pizza stands at $590,864,000. This indicates a positive and robust cash flow from its core operations, earning it 1 point under the Piotroski analysis for this criterion. In the past 20 years, Domino’s Pizza has shown a consistent upward trend in CFO, with occasional dips but a general rise from about $102 million in 2003 to nearly $591 million in 2023. This sustained growth amplifies the financial health and operational efficiency of the company, showcasing its ability to generate cash internally. Given the positive trend and yearly increases, this aspect adds significant value to the firm’s financial health assessment.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company’s profitability relative to its total assets. It’s pivotal for evaluating how effectively a company utilizes its assets to generate profit.

Historical change in Return on Assets (ROA) of Dominos Pizza (DPZ)

In 2023, Domino's Pizza (DPZ) reported an ROA of 0.3168, up from 0.2763 in 2022, which represents an increase of approximately 14.65%. This upward trend reflects a positive shift in the company's ability to generate profit from its assets. For comparison, it's intriguing to note that while DPZ's ROA in 2023 still lagged the industry median of 0.3206, the gap has narrowed significantly from 2022, when the industry median was at 0.2873. This demonstrates DPZ’s concerted efforts over the last year to optimize asset utilization and operational efficiency. Consequently, for this criterion, DPZ scores 1 point, underscoring an improvement in financial health and profitability.

Operating Cashflow are higher than Netincome?

This criterion checks if Operating Cash Flow exceeds Net Income, indicating earnings of high quality, backed by actual cash flows.

Historical accruals of Dominos Pizza (DPZ)

For Domino's Pizza (DPZ) in 2023, the Operating Cash Flow is $590,864,000, while the Net Income is $519,118,000. Since the Operating Cash Flow is indeed higher than the Net Income, we add 1 point. This trend is positive as it highlights the company's earnings quality, with actual cash inflows supporting reported profits. Historically, the company has consistently increased its Operating Cash Flow, showing robust financial health and sustainable earnings.

Liquidity of Dominos Pizza (DPZ)

Leverage is declining?

Change in Leverage evaluates the company's financial risk by comparing its debt level from one period to another.

Historical leverage of Dominos Pizza (DPZ)

For Domino's Pizza (DPZ), the leverage ratio has slightly increased in 2023 to 3.0531 from 3.2222 in 2022. Given this increase, it does not gain a point in the Piotroski analysis. If we consider historical leverage data from the last 20 years, the leverage ratio has fluctuated significantly. Leverage peaked in 2018 at 3.8525, and the lowest was in 2005 at 1.5233. The trendline indicates Domino's has leveraged up consistently post-2010, reflecting a period of significant growth but also illustrating a higher reliance on debt financing.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with its current assets. A higher ratio often indicates better liquidity.

Historical Current Ratio of Dominos Pizza (DPZ)

Dominos Pizza's Current Ratio has increased from 1.4734 in 2022 to 1.4932 in 2023, resulting in a 1-point addition according to the Piotroski score criteria. Over the last 20 years, Dominos has generally maintained a Current Ratio above the industry median. In 2023, Dominos' Current Ratio of 1.4932 significantly outperforms the industry median of 0.777. This trend is good as it indicates improved liquidity and financial health for Dominos Pizza.

Number of shares not diluted?

Changes in shares outstanding reflect the number of issued and available shares of a company. A decreasing number usually signals buybacks, which can indicate a company's confidence in its financial health as repurchased shares reduce the outstanding count, increasing the value of remaining shares.

Historical outstanding shares of Dominos Pizza (DPZ)

Comparing the 2022 and 2023 data for Domino's Pizza (DPZ), we observe that the outstanding shares have decreased from 35,724,325 in 2022 to 35,081,779 in 2023. This reduction translates to approximately a 1.8% decrease in outstanding shares. Given that a decrease in outstanding shares generally implies share repurchase programs, this is typically viewed positively as it shows the company's confidence and is aimed at boosting shareholder value. Observing the 20-year trend, notable reductions can be seen after 2016, aligning with strengthened stock repurchase activities. Therefore, for the Piotroski Analysis, this criterion scores 1 point, indicating a favorable trend for DPZ.

Operating of Dominos Pizza (DPZ)

Cross Margin is growing?

The Gross Margin measures the proportion of revenue that exceeds the cost of goods sold, providing insight into a company's financial health and pricing strategy. A higher Gross Margin generally suggests a more profitable and efficiently run company.

Historical gross margin of Dominos Pizza (DPZ)

Domino's Pizza (DPZ) has seen an improvement in its Gross Margin, increasing from 0.3634 in 2022 to 0.3856 in 2023. This upward trend is a positive indicator, suggesting better cost management and pricing power. Compared to the industry median Gross Margin of 0.3206 in 2023, Domino's performance is notably superior. Over the last 20 years, Domino's Gross Margin has generally trended upwards, surpassing the industry median consistently in recent years. This sustained improvement underscores the company’s operational efficiency and robust business model, adding 1 point in the Piotroski analysis.

Asset Turnover Ratio is growing?

The Asset Turnover ratio measures a company's efficiency in using its assets to generate sales or revenue. A higher ratio indicates better performance and efficiency.

Historical asset turnover ratio of Dominos Pizza (DPZ)

Comparing Dominos Pizza's Asset Turnover ratio of 2.7337 in 2023 to 2.7716 in 2022, it shows a slight decrease. This results in 0 points based on the Piotroski F-Score criterion. Historically, Dominos had higher asset turnover ratios above 3 in previous years but has seen a decline in recent years, indicating potential challenges in asset utilization efficiency.


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