Domino's Pizza, Inc. (DPZ)

Total return at 5 years: 11.2%/year = 8.4% appreciation + 2.8% dividend. The target price ($462) is ex-dividend; the $50 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $522 · Multiples $415) exceeds the market price ($309).

Today — fairly valued: at $309 trades ~25.6% below its value discounted to today (~$415); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($462) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$263.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($309) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-7.3%/year) than we project (4.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.4 bn of owner earnings in year 5 (vs ~$0.8 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on EV/NOPAT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the TTM closed on June 14, 2026 (revenue US$5,027.8M, net income US$596.5M). Domino's is valued at the enterprise level, on year-five NOPAT (§3). It is separated here from McDonald's and Yum, which remain at the equity level because their debt is structural to a real-estate model — they own the land, just like a real estate investment trust — Domino's does not own real estate, and its securitized debt of US$4,884 million, at a leverage of 4.3 times, is merely buyback funding backed by the royalty flow. A liability of that size, 42% of market value, has to show up in the bridge and not stay hidden inside the multiple. The band does not shift on migration, because NOPAT is in the same after-tax units as earnings. Year 1 starts at 4.3%, anchored to the total revenue growth reported in the Q2 2026 8-K (+4.3% for the quarter, +3.9% for the half), below the +5.2% of the consolidated TTM: the 8-K does not carry explicit numeric guidance for fiscal 2026 (only quarterly results), so the path uses the most recent, verifiable pace as its anchor, declaring the real deceleration detected in the company's own release (U.S. same-store sales falling from +1.4% to +0.5% year over year over the half) instead of extrapolating the TTM. The path decelerates smoothly to 3.0% by year 5, within the band of a mature consumer-staple/franchise business (3%-6%). Margins improve slightly on operating leverage (EBIT margin 19.5%→20.0%; net margin 11.9%→12.3%), consistent with the 2024-2026 trend. The historical net buyback (2024→2025: -2.2%; 2026 half-year annualized: -2.6% to -3.2%) is modeled at -2.3%/year, THE same share path across all three scenarios (Bear/Base/Bull) by hard method rule — only growth, margin, and exit multiple change. The base multiple (19.7x) comes from weighting by profit the two bands that coexist in the business: the restaurant franchisor band [18x,24x] at 73% and the food wholesale distribution band [13x,18x] at 27%, which is the weight of the captive supply chain in fiscal 2025 segment profit. Supporting the position is a return on capital well above the 10% bar (invested capital of just US$729M due to structurally negative equity) and a wide but stable moat, not widening.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $462 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $309, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $462 in 5 years plus $50 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $415. Against the current market price ($309), the margin of safety is 25.6% (trades below the maximum → there is margin) and the total return at that price would be 11.2% annually.

• Multiple within the band. The base-case exit multiple (19.7x) weights the two bands of the business by profit: the restaurant franchisor band (18x-24x on earnings) at 73% and the food wholesale distribution band (13x-18x) at 27%, which is the weight of the captive supply chain in segment profit.
• Expected return. The base path projects +11% annual over five years, with It trades at a real discount to value, though short of the required margin of safety..
• Buybacks as a value driver. Sustained buybacks (~2.3%/year net share count reduction) amplify per-share value even with moderate earnings growth.
• Reverse approach. The reverse approach shows what implied growth today's price is paying for; compared against the base path, it helps read how much margin of error the thesis can tolerate.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (104%, cash vs. accruals)
• ✕ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. ROIC comfortably exceeds the 10% bar, reflecting the royalty model with minimal invested capital (structurally negative book equity).
• Predictable cash generation. Stable operating cash flow, with moderate maintenance capex relative to depreciation.
• Low stock-based compensation. SBC represents just 0.9% of revenue and 6.8% of free cash flow, with no material distortion to the valuation metric.
• Cash conversion. Free cash flow ran below net income in the recent half due to higher capital spending and advertising payment timing.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Domino's reports its operating KPIs by line (retail sales, same-store sales, net store openings) consistently between the annual 10-K and the quarterly releases, which allows anchoring the growth path to a contracted/verifiable data point (new units) in addition to the same-store sales component, which is more volatile. The historical series of global retail sales at the segment level is not available at the same level of detail across all periods, so the points shown are limited to the years and quarters where the data is explicitly disclosed in the corresponding filing.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (14-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Domestic slowdown. U.S. same-store sales fell from +1.4% in the first half of 2025 to +0.5% in the same period of 2026.
• International engine. Net international store growth (604 units in 2025, 995 over the trailing twelve months) remains the main expansion driver.
• Supply chain as a lever. Supply chain revenue grew 5.1% in 2025, tied to order volume and repricing of the input basket (+3.5%).
• Negative international same-store sales. International same-store sales fell slightly (-0.2% ex-FX) in the first half of 2026, the first sign of weakness outside the U.S.

• Capital-light model. ~99% of stores are franchisee-owned; Domino's collects royalties and sells supplies through its own supply chain without putting up the capital for each location.
• Single-product dependence. The business depends almost entirely on the pizza category; a shift in consumer preferences (including GLP-1 agonists) hits demand directly.
• Category leadership. 32.9% share in U.S. delivery and 19.6% in carryout, with ~23.3% total market share, up from 2024.
• Aggregator exposure. Competition from Uber and DoorDash pressures margins and control of the customer relationship, even with distribution agreements in place.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• !Interest coverage (EBIT / interest)5.5x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 104% of ROIC
• ✓Value creation (ROIC − 10% bar)+95pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.4x
• ✓Float / working capitalFrees up cash $0 bn (float / negative WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.9% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Negative book equity. Equity is approximately US$-4.0bn after years of aggressive buybacks; it is structural to the franchise model with securitized debt, not a sign of operating insolvency.
• Elevated leverage. Leverage ratio of 4.3x adjusted EBITDA, within the company's historical range (4x-6x) but sensitive to a rate increase when refinancing.
• Structured securitized debt. The debt is made up of fixed-rate securitized notes with staggered maturities, structured similarly to other large franchisors (McDonald's, Yum Brands).
• Liquidity. Cash and equivalents of US$164.8M as of the close of the second quarter of 2026, sufficient against current obligations given stable operating cash flow.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Of the cash deployed over the trailing twelve months (capex + dividend + buyback, ~US$758M), the company allocated 51.3% to share buybacks, 32.3% to the dividend, and just 16.4% to capex reinvestment — consistent with a maintenance business rather than one investing heavily in owned capital expansion. There was no material M&A during the period. The result is a nearly pure capital-return vehicle on a stable earnings base, sustaining both dividend-per-share growth (from US$6.04 in FY2024 to US$6.96 in FY2025, +15.2%) and a continued net reduction in share count.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO with operational focus. Russell Weiner emphasizes order growth as the long-term driver, amid pressure on demand across the U.S. QSR sector.
• Berkshire Hathaway as shareholder. Warren Buffett/Berkshire Hathaway owns 9.96% of shares, a relevant quality signal for a value-investing philosophy.
• Low insider ownership. Directors and executives as a group own just 0.89% of shares outstanding.
• Capital allocation. Practically all free cash flow is returned via buybacks (51.3%) and the dividend (32.3%), with minimal capex reinvestment (16.4%).

• The recent slowdown in U.S. same-store sales (from +1.4% to +0.5% year over year in the half) raises near-term doubts about the domestic growth engine, just as management's own release acknowledges demand pressure across the entire U.S. QSR industry.
• Negative book equity (~US$-4.0bn) and the 4.3x leverage ratio on adjusted EBITDA produce a superficial reading of elevated financial risk, even though the cash flow that supports that debt — recurring royalties on a franchise system with 99% renewal — is stable and predictable.
• Slightly negative international same-store sales (-0.2% ex-FX) in the first half of 2026 break a streak of sustained growth outside the U.S., generating caution about the global expansion thesis via master franchisees.

None of these three factors alters the low-capital royalty model or the cash flow that sustains the dividend and the ongoing buyback: they are near-term signals (missing buyers facing a recent slowdown, not a broken business) rather than evidence of structural deterioration in the franchise system. The real disconfirmer to watch is whether the same-store sales slowdown deepens in coming quarters, which would change the diagnosis.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +1%/year (+4% total): the margin of safety protects the downside. The bull (+17%/year, +121% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Competition from delivery aggregators. Uber and DoorDash are gaining scale and pressuring the direct customer relationship and store-level margins.
• Single-product dependence. The business depends almost entirely on pizza; shifts in consumer preference (including the use of GLP-1 agonists) are a structural risk.
• Supplier concentration. Cheese (~25% of the purchasing basket) and most meats are each bought from a single supplier, under contracts expiring in 2027 and 2029.
• Financial leverage. Total debt of ~US$4.9bn against negative book equity; a sustained rate increase makes refinancing the securitized notes more expensive.
• Geopolitical risk and DPC Dash. The investment in the China master franchisee (DPC Dash) is risky, and the company discloses exposure to anti-American sentiment in some markets.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 105% above the 10% bar, but the margin is limited (+26%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 4% at a multiple/growth of 4.9 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 10% (EBIT/EV) + ROIC 105% → makes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -7% vs our 4%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -3%/yr, bull-scenario ceiling +15%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, cost advantage, switching costs, efficient scale → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -7%, within what we project (4%) — the story squares with the numbers.