It's Time to Bench Domino's Pizza (DPZ) Stock
NEW YORK (TheStreet) -- Pizza and beer are the two basic food groups during football season, in my opinion. The price of Molson Coors Brewing (TAP) is still pointed up, but the chart of Domino's Pizza (DPZ) - Get Report peaked in the summer and prices could get soggy in the weeks ahead.
DPZ made a small "blow off" top in July and has eroded lower since, chart above. The On-Balance-Volume (OBV) line is pointed down, the 50-day moving average is pointed down, and the chart support around $100 has been probed at least three times.
With the Moving Average Convergence Divergence oscillator below the zero line, it would not be hard to imagine that the next test breaks the $100 support area. Traders that like the long side should avoid
TheStreet Ratings team rates DOMINO'S PIZZA INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate DOMINO'S PIZZA INC (DPZ) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, growth in earnings per share, increase in net income and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DPZ's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 8.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DOMINO'S PIZZA INC has improved earnings per share by 6.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DOMINO'S PIZZA INC increased its bottom line by earning $2.86 versus $2.47 in the prior year. This year, the market expects an improvement in earnings ($3.43 versus $2.86).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Hotels, Restaurants & Leisure industry average. The net income increased by 6.2% when compared to the same quarter one year prior, going from $35.62 million to $37.83 million.
- Net operating cash flow has slightly increased to $63.71 million or 9.67% when compared to the same quarter last year. In addition, DOMINO'S PIZZA INC has also modestly surpassed the industry average cash flow growth rate of 2.77%.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: DPZ
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.