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DPZ, sales growth accelerates
🎯 🍕 📈 USD590.5
Last 12-month cashflow +USD381m ↔️

October 24th, 2020
​⏰ 1 minute read

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Sales
Sales growth accelerated again in the 3Q +18% from a year ago, from +13% in the 2Q & 4% above our forecast. Sales increased +5% from the 2Q which is by far the fastest growth of the last 5 years. US sales led the way +20% from last year. We’ve increased our 12 month sales growth forecast to +10%, USD4.3bn.

Cashflow
The quarterly jump in sales increased free cashflow excluding working capital to USD103m from USD62m in the 2Q which was 11% above our forecast partly as investment spending was a bit lower. With an assumption of similar investment spending & our higher sales forecast, quarterly free cashflow will increase further to an average of USD116m in this next 12 months.

Sales accelerating, investment reducing, payouts to increase, share to rise further ...

Data file & model
Balance sheet
Like most of the other US companies which we cover, the balance sheet has been in a rising net debt. But the net debt reduced in the 3Q to USD4bn from USD4.16bn in the 2Q. With our forecast positive cashflow & with an total equity payout of USD355m, the net debt will reduce further to USD3.897bn in 12 months time.

Profit
Net profit increased by +15% from a year ago to USD89m, slightly less than sales. This is despite the cash cost ratio of net profit add back non cash costs minus sales as a % of sales increasing by 1% to 88%. We use this 88% costs to predict the next 12 months profit will be +8.2% higher to USD507m.

Value
DPZ continues to pay out capital, so far USD1.35bn in the last 5 years. By our forecasts the payouts will accelerate. At USD15.53bn, it’s 11.47x the capital paid, 3.61x sales, 9.34x assets, equity is negative, forecast yield is 2.3%. We increase our cashflow forecast to USD465m. At 1.6% with an 0.8x adjustment this gives a much higher target price of USD590.5.
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