Image Source: Pixabay
 

As part of our ongoing series, each week we typically conduct a DCF on one of the companies in our screens. This week, we’re analyzing a global leader in quick-service dining — Domino’s Pizza Inc (DPZ).
 

Profile

Domino’s Pizza Inc (DPZ) is the largest pizza company in the world based on global retail sales. Operating in over 90 markets, Domino’s has built a resilient, asset-light franchise model centered on delivery, carryout, and digital ordering. With consistent free cash flow generation, strong brand equity, and tech-forward operations, Domino’s has carved out a durable moat in the fast-casual dining industry.
 

DCF Analysis

Inputs

• Discount Rate: 10%
• Terminal Growth Rate: 3%
• WACC: 10%

Forecasted Free Cash Flows (FCFs) in billions

2025 – FCF: 0.51 | PV: 0.46
2026 – FCF: 0.55 | PV: 0.46
2027 – FCF: 0.58 | PV: 0.44
2028 – FCF: 0.61 | PV: 0.42
2029 – FCF: 0.64 | PV: 0.40

Total Present Value of FCFs = 2.18 billion

Terminal Value Calculation

Using the perpetuity growth model:
Terminal Value = (FCF_2029 × (1 + g)) / (r – g)
= (0.64 × 1.03) / (0.10 – 0.03)
= 0.6592 / 0.07
= 9.42 billion

Present Value of Terminal Value = 9.42 / (1.10)^5 = 5.85 billion

Enterprise Value Calculation

Enterprise Value = PV of FCFs + PV of Terminal Value
= 2.18 + 5.85 = 8.03 billion

Net Debt Calculation

Total Debt = $5.20 billion
Cash = $0.186 billion
Net Debt = 5.20 – 0.186 = 5.014 billion

Equity Value Calculation

Enterprise Value = $8.03 billion
Net Debt = $5.014 billion
Equity Value = 8.03 – 5.014 = 3.016 billion

Per-Share DCF Value

Shares Outstanding ≈ 34.28 million
Per-Share DCF Value = 3.016 billion / 34.28 million = $87.99

Conclusion

• DCF Value: $87.99
• Current Price: $476.34
• Margin of Safety: –82%

Our DCF valuation implies Domino’s Pizza (DPZ) is trading far above its intrinsic value based on conservative free cash flow estimates. While the brand and franchise model are strong, the current stock price appears to reflect aggressive growth assumptions — potentially leaving little room for error.

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