Pizza Guy, by Frank X. CurzioThis is an excerpt from a column that was originally published on RealMoney on July 11 at 8:32 a.m. EDT Domino's ( DPZ), which began trading on the New York Stock Exchange in July 2004, is the largest pizza delivery company in the U.S. It operates through a network of 8,079 stores in 50 countries and all 50 states. Domino's has many advantages over chief rival Papa John's ( PZZA), including brand recognition with top marketing affiliates such as Coca-Cola ( KO) and Nascar. Domino's also has a strong international presence, which can be compared with those of Starbucks ( SBUX), McDonald's ( MCD) and Yum! Brands ( YUM). Because Domino's is not an eat-in restaurant, it operates more efficiently than competitors. It essentially provides the same product mix while using less square footage and fewer employees. Domino's and Papa John's are both expected to grow at 11%, but Domino's trades at just 13 times next year's earnings, compared with 21 times for Papa John's. Given Domino's competitive advantages, this valuation gap will be remedied over time.
Jim Cramer's Anno Domino'sThis is adapted from the recap of the July 24 episode of "Mad Money" published on RealMoney. "What should you do when you make a bad decision based on what a CEO says or what a 'Cramer' says?" Cramer asked viewers Monday. "A lot of Wall Street analysts will pretend that nothing is wrong and that they got the timing wrong, which is 'right' deferred," he said. "That's not how it is done on 'Mad Money.' Let me tell you what to do." Cramer used Domino's Pizza as an example of a stock he had recommended on the basis of bullish comments by the company CEO. He recalled the current advertising campaign that offers any three items from the Domino's menu for $6 each. "If you hadn't bought Domino's stock, you would have been able to afford those three items with those toppings," he said, alluding to the fact that the stock had declined significantly after his bullish call. "So what do I do?" he asked. "I think you buy more," Cramer said. "This is not just Cramer refusing to admit he's wrong. At $22 now, I think buying Domino's is right," he said. "When most people have this happen to them, they act irrationally and sell or act irrationally and refuse to sell." But this is one case in which investors should act rationally and stay invested, he explained. "If Domino's hit a wall and people stopped eating pizza or Domino's had saturated the market for pizza," then that would be a reason to sell, he said. "Domino's isn't much of an eat-in place, so they have lower real estate costs but can sell pizza for the same low prices of its competitors," Cramer said, adding that the company's profit margins would be higher. "I think the long-term thesis is good."
Challenging Cramer's Call on Domino's, by Scott RothbortEditor's note: The following article is a special bonus for RealMoney and Street.com readers. It first appeared on Street Insight on July 25 at 9:18 a.m. EDT. To sign up for Street Insight , where you can read Mr. Rothbort's commentary in real time, please
- Sales in the U.S. are indeed slowing as the company has hit maturation.
- There is no catalyst for the firm until the NFL is up and running in September. Unfortunately, the NFL effect tends to be later in the season, after the weather has turned colder.
- The distribution business is faltering as cheese prices drop.
- The company is piling on debt to buy back stock.
- There are also troubles at Pizza Hut, which is part of Yum! Brands (YUM). This signals that there may be systemic issues in the pizza biz.
Wait for Domino's to Confirm Support, by Dick Arms
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