Domino's Pizza Is Playing the Long Game

The world's largest pizza brand entered the third-quarter earnings report needing to show investors something positive after its disappointing outing in the second quarter. Shares of Domino's Pizza (NYSE: DPZ) are richly valued, but a heightened competitive environment has suppressed same-store sales growth this year.

In July, Domino's reported second-quarter U.S. comp sales of 3% and international comps of 2.4%, which was at the low end of management's three- to five-year outlook range. The latest results from the third quarter revealed further deceleration, with U.S. comps at 2.4% and international at 1.7%.

Normally, a downward trend like that would be enough to send a high-P/E stock plunging on the news, especially with earnings per share up only 5.1% year over year. But the day after Domino's earnings release, the stock was trading up about 5%. During the conference call, management spelled out a plan to gain market share and increase profitability over the long term, which investors clearly approve of.

Source Fool.com