Markets are rarely efficient, and most hedge fund managers and investors throughout history have proven this. If markets were efficient, no trader or investor could beat the market unless they had insane leverage or access to illegal insider information.
That being said, there is clear underperformance in the consumer sector today, especially in food and restaurant stocks. Investors should take a closer look at this underperformance today and consider locking it out for their own portfolios in 2025, since these kinds of gaps typically don’t last long once the rest of the market—and Wall Street—takes control of them.
Stock price movement Domino’s Pizza Inc. NASDAQ: DPZ compared to other pizza chain brands such as Papa John’s International Inc. NASDAQ: PZZA will bring investors the prospect of mispricing that Wall Street analysts will actually learn about in the coming months. Taking a look at performance Chipotle Mexican Grill Inc. New York Stock Exchange: CMG may also provide further evidence of this potential for mispricing in affordable food chains.
Wall Street’s Favorite Metric Has Failed
When analysts and portfolio managers at large banks and hedge funds manage their positions and ideas, they typically weigh the potential outcome in terms of beta. Beta is a measure that measures how volatile a stock is today compared to the S&P 500 Index, so a higher beta (above 1.0) means the stock is more volatile than the market.
The opposite can be said for a beta reading below 1.0, which means the stock is less volatile and safer than the broader market. With this in mind, investors can see how the different price behavior of these three stocks does not meet the basic premise of professional money managers.
Domino Pizza today
Domino’s Pizza
As of 01/10/2025 16:00 Eastern
- 52 week range
- $396.06
▼
$542.75
- Dividend yield
- 1.50%
- P/E ratio
- 24.71
- Target price
- $501.93
With a low beta of 0.90, Domino’s Pizza stock has underperformed Chipotle Mexican Grill stock by a whopping 27% over the past 12 months. However, with Chipotle’s beta significantly higher than 1.3, the recent S&P 500 pullbacks shouldn’t have dealt a bigger blow to Domino’s Pizza stock.
While Chipotle stock is trading at 85% of its 52-week high, which is considered bullish territory, Domino’s Pizza stock is down to only 72% of its 52-week high, which is conversely bearish territory for the company. It looks like Papa John’s stock’s massive underperformance could be dragging down Domino’s Pizza, and if that’s the case, investors should be worried.
The Distinctive Feature of Domino’s Pizza Stocks
Of course, this is a correlation selloff, as neither beta nor fundamentals between Domino’s Pizza and Papa John’s stock suggest that Domino’s stock should be trading that low relative to its 52-week high price. There is one major factor that makes the difference in Domino’s Pizza stock, a financial metric that investors should be aware of in Domino’s Pizza stock today.
This metric is the return on invested capital (ROIC) rate, which is responsible for complicating itself and creating the “I wish I had bought” response when investors look at a stock’s long-term price chart. With an ROIC of over 61%, the Domino’s Pizza sock fits this description perfectly.
Compared to Papa John’s ROIC of approximately 31%, it might seem like a correlation selloff might not be justified after all. Recently, some on Wall Street have realized this inefficiency and decided to take matters into their own hands, such as FMR LLC, which increased its position in the company by 16.3% as of November 2024.
Domino’s Pizza inventory forecast for today
$501.93
Growth potential 24.76%Moderate purchase
Based on ratings from 29 analysts
| High forecast | $612.00 |
|---|---|
| Average forecast | $501.93 |
| Low forecast | $412.00 |
Domino’s Pizza Inventory Forecast Details
This new allocation will bring their position today to a maximum of $941.9 million, or 6.3% ownership of the company. While serving as another bullish indicator for investors to consider Domino’s Pizza as a potential buy during this recent pullback, there is also much more evidence to keep an eye on.
Analysts at Loop Capital have also rated the company a Buy as of November 2024, this time raising their estimate to a high of $559 per share, implying a net upside of 35.4% from where the stock is trading today. This bold call is based not only on the underperformance mentioned above, but also on the stock’s significant discount.
Compared to the retail sector’s average price-to-earnings (P/E) valuation of 98.4x, Domino’s Pizza offers a significant discount thanks to its 25.4x multiple today, which is also heavily compressed compared to its long-term average valuation of 35.0x .
Before you consider Domino’s Pizza, you should hear this.
MarketBeat tracks Wall Street’s top-rated and best-performing analysts daily and the stocks they recommend to their clients. MarketBeat identified five stocks that top analysts are quietly whispering to their clients to buy now, before the broader market takes hold… and Domino’s Pizza wasn’t on the list.
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