Hot Stock: Domino's Pizza

A slice for your portfolio.

dominos pizzaMost people love scarfing down a hot slice of pizza, but have you ever considered buying a piece for your portfolio? If not, now may be a good time to order some shares of Domino’s Pizza  (NYSE:DPZ).

On February 28, the second largest U.S. pizza chain reported that fourth quarter net income rose by 22% or 64 cents a share, beating average analyst expectations of 60 cents a share. Revenues also increased by 8% to $539.7 million. The increase was due in large part to its new pan pizza offerings.  Pan pizzas now account for one in five pizzas sold throughout the industry

This is a slow and steady grower, with S&P Capital IQ analysts predicting 2.9% revenue growth in 2014. However, good growth is coming from international markets. S&P, which has a buy rating on the stock, thinks non-U.S. sales will increase 9% next year and it expects Domino’s to open 300 more stores in international markets over the next 22 months.

Goldman Sachs, which has a buy rating, also thinks next year will be a good one for the company. “Unit growth continues to accelerate around the world,” writes analyst Michael Kelter in a recent report. “The pace of openings may continue to accelerate from here. Established franchisees, several of whom are public, have their own growth targets to hit, and several newly emerging Domino’s Pizza geographies are now also hitting critical mass.”

S&P Capital does point out that Domino’s has a lot of debt which can increase volatility. However, S&P Capital points out that the pizza-makers derives a big chunk of its money from royalties and fees which aren’t affected by franchisees’ operating profits. If you’re hungry for a hot stock, then take a bit of this one.