Domino’s Pizza (DPZ), formerly a member of IBD’s Long-Term Leaders portfolio, is up 32% since hitting a low of 319.71 in early March. DPZ stock has risen to the top of a lengthy consolidation that started in early October and could be poised to break out to an all-time high. But does that make Domino’s stock a buy now?
Domino’s Relative Strength Rating of 35 ranks it No. 42 in IBD’s restaurant group, hurt by lagging 12-month price performance. But a Composite Rating of 68 ranks it No. 19, and an Accumulation/Distribution Rating of A- ranks it No. 9.
The Acc/Dis Rating points toward signs of institutional buying in recent months. Above-average volume price gains help the rating, and above-average volume declines hurt the rating.
Domino’s Stock: Impressive Earnings
DPZ stock reversed impressively higher on April 29 after the company reported its fourth straight quarter of double-digit revenue growth. Big buyers were in Domino’s stock that day after the stock pared a 3% intraday loss to a gain of 3%.
Adjusted Q1 profit dropped 2% year-over-year, but revenue increased 13% to $983.7 million. In an interview with CNBC’s Jim Cramer, CEO Ritch Allison said 75% of orders now come from digital channels.
U.S. same-store sales rose an impressive 13.4%, with international same-stores sales up 11.8%.
India, China, and Japan led in terms of net unit growth. Sales were strong in other markets like China, Japan, Turkey, Colombia, Germany, and France.
The company declared a dividend of 94 cents a share, payable on June 30 to shareholders of record June 15.
To stay competitive with food delivery services like UberEats, Postmates and DoorDash (DASH), Domino’s has been trying to speed up delivery time by opening up more stores.
Wall Street has expressed concern, though, about the company’s “fortressing” strategy, an aggressive expansion strategy where new restaurants are opened near existing ones to improve customer delivery times.
But Q2 revenue increased 13%, with Q3 and Q4 revenue up 18%, so the strategy appears to be working.
To say that Domino’s has embraced technology in recent years would be an understatement. Autonomous driving and artificial intelligence are just two areas the company is targeting to improve efficiency.
The company is currently testing an autonomous vehicle delivery system in Houston in a partnership with robotics firm Nuro.
Full-year profit is expected to rise 8% this year and accelerate in 2022, up 15%. Estimates have been heading higher.
IBD’s restaurant group shows strong technicals overall. The group is near highs and has been trending above its 50-day moving average after a breakout to new highs soon after the Nasdaq composite’s follow-through day, which confirmed a new uptrend in early November.
Several retail-related groups continue to rank well in IBD’s 197 industry group rankings, based on six-month price performance. As of April 30, the restaurant group ranked No. 65, up from a ranking of 73rd three weeks ago.
Domino’s Stock: Is It A Buy Now?
The technical picture for DPZ stock has improved dramatically, although the stock’s relative strength line is still far off highs. It’s good to see the RS line at or near highs when a stock breaks out.
Domino’s stock gave a buy signal on Aug. 29 when it broke out over its Dec. 23 intraday high of 404.57. But DPZ stock is still below its all-time high of 435.58.
After eight straight weekly gains, DPZ stock could pull back and add a handle to its current technical setup. A handle forms when the last remaining sellers exit a stock ahead of a breakout.
It’s best to see handles form in light volume as retail investors exit the stock and institutional investors sit tight.
Please follow Ken Shreve on Twitter at @IBD_KShreve for more on stock market analysis and insight.
YOU MAY ALSO LIKE: