3 Things to Know About Domino's Pizza Stock Before You Buy

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Domino's (NYSE: DPZ) stock found its way back onto many investors' radars last month after Warren Buffett's Berkshire Hathaway disclosed that it had added the pizza purveyor to its portfolio. News that Buffett is buying any stock tends to put a bright spotlight on it, and that attention can sometimes drive the share price higher.

That's partly because Berkshire Hathaway has enough cash on its books that it can comfortably purchase entire companies outright, and partly because so many investors trust Buffett's judgment. The conglomerate's returns have trounced the market over the long term, after all.

Yet it's never a good idea to blindly follow another investor into a stock without clearly understanding what you are purchasing. So let's look at whether you might want to follow Berkshire's lead and pick up shares of this fast-food giant. Here are three things to know about Domino's stock as you consider whether to buy.

1. Domino's is exhibiting better growth lately

2024 hasn't been a great year for most businesses in the food service industry. The lingering impacts of high inflation in 2022 and 2023 have left people more hesitant to spend, and fast-food giants are choosing between growing their traffic or their profit margins. McDonald's CEO Chris Kempczinski, for example, revealed in October that his chain's U.S. sales were flat in Q3 as consumers "continue to be mindful about their spending."

Domino's is turning in better performances. Comparable-store sales in the third quarter rose 5%. Comps were up nearly 7% over the first three quarters of the year compared to a 3% uptick in the prior-year period. "Our ... strategy is working despite a pressured global marketplace," Domino's CEO Russell Weiner said in late October. Keep in mind that this rebound follows three years of below 4% annual comps growth. However, the company is still on an improved expansion path.

2. Domino's maintains an efficient business

Successful fast-food chains are masters of squeezing profits out of their product sales, since value is a core competitive advantage. Domino's isn't nearly as efficient on this score as McDonald's, which relies heavily on rental and franchise fees to boost its margins. However, the pizza delivery chain still has one of the most profitable businesses in its industry. That's largely a function of its tiny store footprint that focuses entirely on carry-out and delivery orders. Its menu isn't complicated, either, requiring relatively few ingredients and simple preparation methods. All of that helps it keep its costs and prices low.