Domino’s Pizza (NASDAQ:DPZ) has rewarded investors with a 10% year-to-date gain. The pizza restaurant chain has been around since 1960 and is one of the best-performing stocks over the past 15 years. Steady revenue growth and double-digit profit margins are some of the catalysts, but the recent gains have some investors wondering if a stock split is possible.
As of this writing, Domino’s Pizza stock trades at $479 per share. Does this high price point ensure a split this year? Here’s what investors should know.
Key Points
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Domino’s Pizza is gaining momentum due to international sales growth and high profit margins.
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With the stock approaching $500 per share, some investors are wondering if a stock split is possible.
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International Stores Continue To Grow
Domino’s Pizza continues to grow its international presence, and that is one of the reasons shares are up year-to-date. The restaurant chain delivered 3.7% year-over-year same-store sales growth in international markets during the first quarter.
Rising international sales helped offset a small dip in domestic year-over-year same-store sales growth. Domino’s Pizza also has more room to expand in international markets, so it’s good to see that the company is gaining market share. The company’s growth comes as other U.S. companies like Starbucks (NASDAQ:SBUX) and Nike (NYSE:NKE) continue to lose market share in global markets.
Analysts Are Bullish
Wall Street analysts rushed to raise their price targets after Domino’s Pizza reported Q1 earnings. While you shouldn’t make any investment decisions exclusively based on analysts’ opinions, these individuals get paid to monitor stocks and discover opportunities. Analysts know more than the average investor, and several of them are bullish on Domino’s Pizza.
RBC Capital analyst Logan Reich recently raised his price target from $500 per share to $550 per share. The higher price target suggests that Domino’s Pizza stock has more room to run. While you wait, you can enjoy a tasty 1.45% dividend yield. Domino’s Pizza has raised its dividend for 13 consecutive years while maintaining an annualized 18.1% growth rate over the past five years.
High Profit Margins
The restaurant industry isn’t known for high margins, but Domino’s Pizza is an exception to the rule. The company delivered a 13.5% net profit margin in the first quarter. Revenue inched up by 2.5% year-over-year while net income soared by 18.9% year-over-year.
High profit margins give Domino’s Pizza the flexibility to support high dividend hikes in the future. The stock also trades at a 27.4 P/E ratio, which is reasonable for a company that is expanding its profit margins.
Even if Domino’s Pizza continues to report low-single-digit revenue growth rates, the company’s ability to expand profit margins can push the stock price higher.
Is A Domino’s Pizza Stock Split Possible?
The $479 price point suggests that a stock split is possible. DPZ hasn’t gone through any recorded stock splits based on its website history. However, companies like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) resisted stock splits for many years but finally caved with 20-for-1 stock splits in summer 2022.
A 3-for-1 stock split would make sense, as Domino’s Pizza stock would still trade above $150 per share after that split. There’s no guarantee a stock split happens, but if it does, DPZ stock would be more accessible to options traders.
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