Domino’s Delivers a Q3 Beat—and a Recipe for a Rebound

Key Points

• Domino's Pizza's stock price reversed following the Q3 release and could rebound strongly before year-end.
• The results affirm a robust outlook for capital returns.
• Analysts and institutional trends provide a solid support base and tailwind for price action in Q4. 

Domino’s Pizza NASDAQ: DPZ delivered what investors wanted in Q3, sending its stock price into a reversal that could add 20% to the stock price this year and 100% or more over the long term. Investors wanted a better-than-expected report that affirmed the company’s growth outlook, valuation, and capacity for aggressive capital returns. 

Aggressive capital returns equate to a dividend distribution that annualizes to 1.7% with shares near their long-term lows, increasing annually, and share buybacks. The share buybacks are of particular interest, as they reduced the count by an average of 2.6% over the preceding 12 months and are expected to remain robust in FQ4 and the subsequent fiscal year. 

Regarding valuation and growth outlook, Domino’s Pizza traded at approximately 24x its current-year earnings forecast ahead of the release. That is above the broad market average, pricing in significant growth over the coming years.

The consensus reported by MarketBeat is that this stock trading is at a much lower 10x earnings relative to the 2035 forecast, suggesting that a deep value and a 100% stock price increase are possible.

Assuming the company continues outperforming, as it did in Q3, the long-term forecasts are too low, and the value is deeper than it appears. 

Domino’s Pizza: Revenue and Free Cash Flow Growth Accelerate

Domino’s faced headwinds in Q3 but performed well despite its impacts. The company grew revenue by 6.3%, outpacing the consensus by a slim margin to deliver a record quarter. Gains were driven by supply chain, U.S. royalties, ad revenue, and higher market basket pricing. Order volume and an increased store count are also in the mix, with U.S. comps up by 5.2%, trailed by a smaller 1.7% increase in International comparable sales, and stores up nearly 1% net. 

Margin is another area of strength. The company experienced some margin pressure, primarily non-cash, related to its investment in DPC Dash Ltd., its China-based operations. The critical details are that income from operations increased by a leveraged 11.8%, while net cash and free cash flow improved by 23% and 31%, respectively, leaving the capital return in a healthy position. The dividend payout ratio was below 25% of free cash flow in Q3, leaving ample cash for share repurchases, reinvestment, and debt service. 

Analysts' Trends Align With a Rebounding DPZ Share Price 

A series of price target reductions impacted DPZ's share price in Q3, ultimately setting the market up for a rebound. Although the activity leading into the Q3 release includes numerous price target reductions, the reductions align with the consensus forecast for a 20% rebound, and the trends remain positive.

The consensus was up compared to the prior month, quarter, and year, with Q3 results likely to catalyze some affirmations, if not upward revisions, in Q4. Regardless, Domino’s stock has a solid support base, with 24 analysts covering it, 95% institutional interest, and a tailwind for price action, as institutions have been buying robustly in 2025. 

The post-release price action is favorable to retail sector investors. The market advanced 5% in premarket trading, confirming support at the critical level. That level aligns with the bottom of a multi-year trading range and the mid-point of an even longer-term range, a likely target for traders and investors alike.

The question is whether this market will move above the critical resistance, which aligns with a cluster of moving averages near $430. If so, DPZ stock will likely rise to $500 within the next few months. If not, DPZ stock could wallow near current levels until a more potent catalyst emerges.