Last week, you might have seen that Domino's Pizza, Inc. (NYSE:DPZ) released its quarterly result to the market. The early response was not positive, with shares down 9.9% to US$391 in the past week. Revenues of US$968m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$2.49, missing estimates by 8.9%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Domino's Pizza's 25 analysts is for revenues of US$4.31b in 2021, which would reflect a meaningful 10% increase on its sales over the past 12 months. Statutory earnings per share are predicted to rise 7.3% to US$12.80. Before this earnings report, the analysts had been forecasting revenues of US$4.28b and earnings per share (EPS) of US$12.99 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$431. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Domino's Pizza analyst has a price target of US$500 per share, while the most pessimistic values it at US$370. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 10%, in line with its 13% annual growth over the past five years. Compare this with the wider industry (in aggregate), which analyst estimates suggest will see revenues grow 21% next year. So although Domino's Pizza is expected to maintain its revenue growth rate, it's forecast to grow slower than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Domino's Pizza going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Domino's Pizza (1 doesn't sit too well with us!) that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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