NEW YORK (TheStreet) -- TheStreet's Jim Cramer says investors panic every time they hear gross margins are decreasing as raw costs are increasing. So it took people's breath away when Domino's Pizza (DPZ) CEO Patrick Doyle said on a conference call late last week that the price of cheese has risen, but Cramer says it should not have caused such a reaction.
Cramer points out that this is a problem for the company-owned stores , which are very small because Domino's is largely a franchise model. He calls this an opportunity to buy a high-quality stock even though some investors think the chart is not that good and the numbers have not bumped enough.
Cramer notes the stock went from $10 to $80 since Doyle took over and has now pulled back to the low $70 range. That, he says, is an opportunity to buy, not sell.
Separately, 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 multiple strengths, 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, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these 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 4.0%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 31.40% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DPZ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- DOMINO'S PIZZA INC has improved earnings per share by 21.9% 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 $2.47 versus $1.90 in the prior year. This year, the market expects an improvement in earnings ($2.82 versus $2.47).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 18.9% when compared to the same quarter one year prior, going from $37.58 million to $44.66 million.
- Net operating cash flow has increased to $89.41 million or 19.11% when compared to the same quarter last year. In addition, DOMINO'S PIZZA INC has also vastly surpassed the industry average cash flow growth rate of -85.10%.
- You can view the full analysis from the report here: DPZ Ratings Report