Correction Equals Opportunity in Domino’s Pizza Stock

Key Points

• Domino's Pizza's CEO left the post unexpectedly, sending the stock lower overnight. However this won't change much other than create a buying opportunity.
• The fundamentals have been, and will continue to be, as solid as ever for this company and its trajectory.
• Wall Street analysts call for double-digit EPS growth rates as well as upside in valuations.

Financial markets typically see increased sensitivity to any and all news when valuations reach a point where doubt and justification need to cross thresholds in order to stop tipping points in any direction. With the S&P 500 now trading at all-time highs, most stocks within the index remain as sensitive as ever to news, regardless of whether it has any material impact on the business's future or not.

This is where a focus on fundamentals comes in handy, as investors can lean on the factors that have survived the test of time in keeping stock prices afloat even if negativity overwhelms them, which is exactly why investors need to look within the business fundamentals of Domino’s Pizza Inc. NASDAQ: DPZ as the stock goes on a downtrend recently on what may not be bad news after all.

The company’s CEO decided to unexpectedly leave his post for Domino’s Pizza, which may be news to retail investors. Still, it appears that the information had already been public for some time. Judging by the stock’s price action, it is not too far-fetched for investors to think that someone (or a group of investors) had the inside information before it became public, but what happens next is just as important as the news release.

Why a New CEO Won’t Change Much for Domino’s Pizza

The reason for leaving is not clear, and it likely never will be, but that doesn’t matter. What matters is that Domino’s Pizza has been in business long enough to enter an ex-growth phase, which is the typical path for companies of this maturity. That also means leadership roles are more of a formality than a necessity.

This is not to say that a CEO is not necessary. Still, this business can run effectively on its own, considering the significant market share and brand recognition it has achieved over the years. Unless the company plans to change its business model or product radically, investors don’t have much to worry about when it comes to a change in CEO.

That being said, it is time to dig deeper, past the business model and its current position in the retail sector. This stock has historically been seen as safe due to the underlying stability and non-cyclicality of the pizza industry. That same dynamic makes it hard for other names to start competing with this leader.

In fact, the only real competitor to Domino’s Pizza is Papa John’s International Inc. NASDAQ: PZZA, although the market capitalization gap between the two may be the answer investors need. Domino’s Pizza’s market capitalization is just under $16 billion, while Papa John’s is only $1.6 billion, nearly ten times smaller.

This size advantage enables Domino’s Pizza to more easily navigate today's challenging environments, characterized by cost inflation and trade dynamics between the United States and other nations. More than that, it allows for the main financial benefits likely to quiet most (if not all) of the fears currently associated with this news release.

Why Investors Should Look to Domino’s Pizza

Building on the company’s size and brand reach, investors can quickly quantify these benefits in the financials, where a net income margin of up to 14% stands above the average for a retail stock. However, that is only the beginning. Since Domino’s Pizza also has a gross margin of 28.4%, this net margin is only expected to remain stable.

What that translates into is a steady path for increasing earnings per share (EPS), which is where the true meaning of a wealth compounder comes into play. In fact, Wall Street analysts now expect to see up to $5.62 in EPS for the fourth quarter of 2025, which implies a net growth rate of 30% from today’s reported $4.33.

As most investors know, where EPS growth goes, so does the stock price. That is precisely why they should pay attention to this short-term dip and realize that a change in CEO likely won’t have any material impact on the company’s rock-solid margins and EPS growth trajectory.

Another benefit of the stock now being down to 90% of its 52-week high is that it is in an official correction territory. This may lead some institutional players to come in and support the price back to its previous highs (or even higher). Speaking of which, those from Marshfield Associates decided to build up a stake worth $329.4 million as of mid-May 2025.

Last but not least, there is still a high level of conviction emanating from Wall Street. Royal Bank of Canada analyst Logan Reich has decided to reiterate his Outperform rating on Domino’s Pizza stock, alongside a price target of $550 per share. The fact that this valuation was set (and not changed) since late April 2025 indicates that analysts remain committed to this being the likely outcome for the stock.

That outcome would imply an additional 22% upside for investors who take advantage of this correction, which has proven to be driven by immaterial news regarding the company's future financial growth.