Domino's Pizza (NASDAQ:DPZ) shareholders have earned a 7.8% CAGR over the last three years

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2 days ago

Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Domino's Pizza, Inc. (NASDAQ:DPZ) share price. It's up 20% over three years, but that is below the market return. Zooming in, the stock is up a respectable 12% in the last year.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Domino's Pizza was able to grow its EPS at 10% per year over three years, sending the share price higher. This EPS growth is higher than the 6% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Domino's Pizza has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Domino's Pizza will grow revenue in the future.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Domino's Pizza the TSR over the last 3 years was 25%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Domino's Pizza provided a TSR of 14% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 5% over half a decade It is possible that returns will improve along with the business fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Domino's Pizza you should be aware of.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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