Domino’s Pizza, Inc. (DPZ): The Best Investment in Pizza

“Our pizza stinks!”

That’s pretty much what Domino’s Pizza, Inc. (NYSE:DPZ) was saying approximately three-and-a-half years ago. Through an advertising campaign, the company admitted its foul-ups and promised to do better. The brilliance behind this concept was that Americans appreciate honesty. The campaign helped, but the improved pizza helped even more.

Domino's Pizza, Inc. (NYSE:DPZ)

Recently, Domino’s made further improvements. This doesn’t mean that Domino’s Pizza, Inc. (NYSE:DPZ) makes a good investment going forward, though.

The turnaround

After the financial crisis and an embarrassing event involving a worker being taped performing a disgusting act, it looked like Domino’s was on a dangerous path toward failure. Instead of giving up, however, the company planned its work and worked its plan.

Revenue and earnings have consistently improved on an annual basis. In the first quarter, revenue jumped 8.60% and earnings skyrocketed 65.90% year over year. Domino’s has now beat earnings expectations for four consecutive quarters.

Recently, Domino’s Pizza, Inc. (NYSE:DPZ) added a “Pizza Theater” to some locations which allows customers to watch the pizza-making process. This might sound like a simple feature, but what it really does is ease the concerns of customers in regards to what goes on in Domino’s kitchens. The best part is that you don’t even need to be at Domino’s to feel good about the pizza not being tampered with. Domino’s is busy enough that there’s almost always someone standing there, watching the pizza-makers work. Another neat feature is an electric board that will make it easier to track orders.

As if that’s not enough when it comes to strategic decisions made by management, Domino’s Pizza, Inc. (NYSE:DPZ) has been way ahead of the industry curve when it comes to digital ordering. Through all of its apps — now including apps for Windows Phone 8, iPhone, iPod Touch, and Amazon Kindle Fire — digital orders increased 5% last year. Domino’s even added a Spanish-language app to help maximize its digital ordering potential.

As far as online orders go, according to Alexa.com, the global traffic rank for dominos.com has dropped 182 spots to 3,025 over the past three months. This might indicate a slight decline in demand, but it’s a very small move and shouldn’t play a big role in your investing decision-making process.

Dominos vs. peers

Domino’s pizza is currently trading at 27 times earnings, which is right at the industry average. It’s still more expensive than Papa John’s Int’l, Inc. (NASDAQ:PZZA) and Yum! Brands, Inc. (NYSE:YUM), however, which are currently trading at 24 times earnings and 18 times earnings, respectively. Domino’s does yield 1.40%, which is also a selling point.