Why Domino's Pizza, Inc. Stock Gained 15% Last Month

MarketsMotley Fool

What happened

Shares of Domino's Pizza, Inc. (NYSE: DPZ) were heating up last month on excitement over the recent tax law and a strong holiday season, overcoming the surprise news that CEO Patrick Doyle would retire. The stock finished January 15% higher, according to data from S&P Global Market Intelligence.

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As the chart below shows, the stock gained fairly consistently over the course of the month as investors seemed to take advantage of an earlier sell-off.

DPZ data by YCharts

So what

The biggest news out on Domino's during the month actually sent investors momentarily fleeing the stock as Doyle said he would step down from the leadership post at the end of June. During his eight years at the helm, Doyle guided the company through an ambitious turnaround as it invested heavily in technology to make ordering easier and more convenient, and revamped its recipes after Doyle admitted in a TV ad campaign that the company's pizza simply didn't taste good. As a result of those initiatives, sales and profits soared, and the stock gained about 1,500% under his tenure.

Based on that performance, his departure leaves a question mark for Domino's, but investors seem to believe in the company's continued growth. Domino's has consistently put up strong comparable sales growth and, with a lower tax rate, momentum in the retail sector, and a strong global economy, the company seems primed for ongoing success.

Now what

While most restaurant stocks have been pressured over the last two years by the "restaurant recession" and oversaturation in the industry, Domino's sales and earnings continue to surge as the company's new menu items and the popularity of food delivery in the e-commerce era resonate with customers. Domino's, for instance, touted 15 different digital ways to order for Super Bowl Sunday, including Amazon's Alexa, Slack, and Facebook Messenger.

Domino's is also expanding quickly, adding hundreds of new stores every quarter, the majority being overseas. I'd expect another strong quarter when the company reports fourth-quarter earnings Feb. 20.

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