The firm said it lowered its rating on the pizza restaurant chain based on the company's free cash flow, which is lower when compared to Domino's competition.
Bank of America/Merrill Lynch lowered its price target on the stock to $68 from $77.
Separately, TheStreet Ratings team rates DOMINO'S PIZZA INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DOMINO'S PIZZA INC (DPZ) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 8.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The gross profit margin for DOMINO'S PIZZA INC is currently lower than what is desirable, coming in at 31.61%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.91% trails that of the industry average.
- Net operating cash flow has decreased to $36.20 million or 24.01% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: DPZ Ratings Report