We recently compiled a list of the 9 Best Pizza Stocks to Buy Now. In this article, we are going to take a look at where Domino’s Pizza, Inc. (NYSE:DPZ) stands against the other pizza stocks.
How’s the Pizza Market Doing?
Originating from Italy hundreds of years ago, and spreading across the globe like wildfire ever since, pizza has always been the consumers’ go-to food option, and hence, its market is growing to date. As such, as reported in one of our articles on best pizza stocks to buy, the pizza market is set to experience a CAGR of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion by 2032. Similarly, the frozen pizza segment is also expected to increase during the period 2023-2028, gathering a market size of $5.96 billion during the period, showcasing a CAGR of 4.96%.
The popularity of pizza can be judged from the statistics showing that there are 245,000 pizza restaurants in the world, and around 77,000 restaurants within the U.S. The U.S. itself experienced record-high pizza sales of $46.9 billion in 2022, thanks to over 7,000 units opening up in the eight years up till 2022. This reinforces the fact that the largest pizza chains in the world are based in the U.S. Pizza Hut, one of the biggest pizza brands in the world, is the oldest one, which was founded back in 1958 in Kansas, USA.
What’s Cooking in the Industry?
Within the frozen pizza segment, meat toppings dominate the market as it has a share of 56% in sales, while vegetable toppings have a share of 26%. In contrast, cheese toppings are also competing nicely, as it has a 14% share, as reported by media.market.us. DiGiorno, Red Baron, and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand awareness.
The recent trends in the pizza market include rising demand for vegan pizzas (frozen or otherwise); this evolving market of pizza has got is on a roll, as new demands keep popping up for cheese substitutes, all sorts of pepperoni, Mexican style meats like Birria and chorizo, and new topping varieties
What’s new in the industry is the rapid acceleration of technology use in the context of operators, as a survey shows that 748 pizza makers in the U.S. find online ordering the new go-to way of consuming pizzas and that 78.21% of the producers are investing in a great deal to up their brand presence across the internet. The optimism is on the high side as well amongst the pizza makers as most believe in sales growth in the next twelve months.
Thus, certainly, the pizza market is one to grow indefinitely (or at least it should), and hence, to capitalize on this growth, one must know the best pizza stock to buy. So, let’s move on to our list of 9 Best Pizza Stocks to Buy Now.
Methodology
To curate our list of 9 Best Pizza Stocks to Buy Now, we gathered a list of all companies with a significant presence in the pizza industry and related industries of cheese and flour. We then further narrowed them down on the basis of various metrics like institutional ownership, the number of analysts watching the stock, and the overall financial health of respective stocks. We ranked the finest remaining companies by the number of hedge funds that had stake in them as of Q2, 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close up shot of a pizza being freshly made in a restaurant kitchen.
Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 52
Upside Potential: 12.47%
Next in line is Domino’s. The company saw a 7.2% growth in global retail sales in Q2 2024, after adjusting for the foreign currency impact. Same-store sales also drove U.S. sales by 6.8%, thanks to the its effective marketing strategy. Furthermore, the company’s pricing improved by 1.5%, along with the Uber Eats platform contributing to its sales by 1.9%.
However, the international market has been on the timid side for Domino’s as its expected net sales growth is down to 175-275 stores, majorly because of instability experienced by Domino’s Pizza Enterprises in openings and closures of its stores internationally; however, the company expects 175 net units’ growth annually by 2028 in the U.S.
On the other side, China and India are turning out to be two very successful regions for the company as the former saw its 1000th store opening in the country, and expects drastic growth in 2025; this growth is expected to continue as Domino’s effective marketing strategy, in the form of successful Boost weeks, is set to drive the sales growth upwards.
Thus, anticipations are in place for a growth of over 7% in global retail sales in 2024, and operating income is also expected to grow by 8% on a YoY basis; however, margins are expected to be flat due to higher operating expenses.
Given the fact that Domino’s Pizza, Inc. (NYSE:DPZ) has strong growth prospects for the next year or so, and given the strategic plays by the company, analysts seem to be relying on the prospects and hence, 30 analysts have given a buy rating for the stock, and anticipate a 12.5% stock appreciation. This is further supported by hedge fund sentiment; as of Q2 2024, 52 hedge funds are bullish on the stock, which is an increase of 12 hedge fund holders from the prior quarter.
Overall DPZ ranks 1st on our list of the best pizza stocks to buy. While we acknowledge the potential of DPZ as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than DPZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.