Domino’s Vs. Papa John’s: Which Pizza Delivery Stock Is A Better Buy?

pepperoni pizza

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Papa John’s International, Inc. (PZZA), which is based in Louisville, Ky., operates and franchises pizza restaurants and provides delivery services internationally. It operates through four segments: Domestic Company-Owned Restaurants; North America Commissaries; North America Franchising; and International Operations. Ann Arbor, Mich.-based Domino’s Pizza, Inc. (DPZ) is a well-known pizza company that operates globally. It operates through three segments: U.S. Stores; International Franchise; and Supply Chain.

Over the past year, restaurants have rearranged their businesses, focusing, notably, on their delivery networks to remain operational amid pandemic-driven lockdowns. However, as the economy revives, and with significant progress on the vaccination front, the demand for dining in restaurants is rebounding. The National Restaurant Association forecasts a 10.7% rise in sales for full-service establishments and an 8% increase in sales for limited-service restaurants in 2021. The forecast bodes well for both DPZ and PZZA.

DPZ share price has gained 36.1% over the past year, while PZZA’s has returned 26.4% over the period. Also, DPZ’s 36.8% gain year-to-date is slightly higher than PZZA’s 35.7% return. Nevertheless, PZZA is the clear winner with 44.2% gains versus DPZ’s 36.6% in terms of their past nine months’ performance.

So, which stock is a better buy now? Let’s find out.

Latest Developments

On June 29, PZZA, in partnership with its franchise partner PJ Western Group, announced its expansion into Germany. The company plans to open 250 restaurants in the German market over the next seven years. This should promote its growth and further accelerate its development in international markets.

On April 20, DPZ announced its expansion in Ghana, strengthening its global footprint. With this, Domino’s now operates in more than 90 markets worldwide.

Recent Financial Results

DPZ’s revenues increased 12.2% year-over-year to $1.03 billion in its fiscal second quarter, ended June 20. Its income from operations grew 16.7% from its year-ago value to $190.90 million, while its net income declined 1.7% year-over-year to $116.62 million. The company’s EPS increased 2.3% year-over-year to $3.06.

PZZA’s revenue increased 24.9% year-over-year to $511.75 million in its fiscal first quarter ended March 28. Its net income stood at $33.88 million, up 301.3% from the same period last year. Its operating income grew 202.9% from its year-ago value to $46.86 million. The company’s EPS has increased 446.7% year-over-year to $0.82.

Past and Expected Financial Performance

DPZ’s revenue has grown at an 11.9% CAGR over the past three years, while its levered FCF has grown 29.6% over this period. Analysts expect DPZ’s revenue to increase 3.8% in the current quarter and 4.9% in the current year. The company’s EPS is expected to grow 15.7% in the current quarter and 4.8% in the current year. Furthermore, its EPS is expected to grow at a rate of 11.2% per annum over the next five years.

On the other hand, PZZA’s revenues and levered FCF grew at CAGRs of 2.4% and 28.9%, respectively, over the past three years. Analysts expect the company’s revenue to increase 4.6% in the current quarter and 9.5% in the current year. The company’s EPS is expected to grow 82.9% in the current quarter and 98.6% in the current year. Moreover, PZZA’s EPS is expected to grow at a 15% rate per annum over the next five years.


In terms of gross profit margin, PZZA is more profitable, with a 30.74% margin versus  DPZ’s 27.77%. However, DPZ’s 19.14% EBITDA margin is higher than PZZA’s 9.49%. DPZ’s trailing-12-month revenue is 2.26 times what PZZA generates.

Furthermore, DPZ’s ROA and ROTC of 29.65% and 42.63%, respectively, compare with PZZA’s 10.04% and 16.34%.


In terms of forward EV/Sales, DPZ is currently trading at 5.59x, which is 56% higher than PZZA, which is currently trading at 2.46x. Also, DPZ’s 27.55 forward EV/EBITDA ratio is 16.7% higher than PZZA’s 22.95.

Thus, PZZA is a relatively more affordable stock here.

POWR Ratings

PZZA has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. DPZ, in contrast, has an overall C rating, which translates to Neutral. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Both the stocks have a B grade for Momentum. This is justified because they are trading well above their respective 50-day and 200-day moving averages.

PZZA has a B grade for Value, while DPZ has a grade of C for Value. PZZA’s 0.01  trailing-12-month PEG ratio is 93.7% lower than the 0.16 industry average, which is in sync with its Value grade. In contrast, DPZ’s 3.99 trailing-12-month PEG multiple is higher than the 0.16 industry average and consistent with its Value grade.

Of the 46 stocks in the A-rated Restaurants industry, PZZA is ranked #6 while DPZ is ranked #31.

Beyond what we’ve stated above, we have also rated both the stocks for Stability, Sentiment, Quality, and Growth. Click here to view PZZA ratings. Also, get all DPZ ratings here.

The Winner

The restaurant industry is witnessing a solid momentum this year, driven by pent-up demand and easing pandemic restrictions. Both DPZ and PZZA are well-established players in the industry with significant market share. But lower valuation and higher growth prospects make PZZA the better buy here.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Restaurants industry here.

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REVISED 2021 Stock Market Outlook

DPZ shares were trading at $526.17 per share on Thursday afternoon, up $1.60 (+0.31%). Year-to-date, DPZ has gained 37.86%, versus an 18.63% rise in the benchmark S&P 500 index during the same period.

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