In honor of Pi Day, four pizza companies that are undervalued or fairly valued based on the GuruFocus GF Value Line are Domino’s Pizza Inc. (DPZ, Financial), Papa John’s International Inc. (PZZA, Financial), Yum Brands Inc. (YUM, Financial) and Yum China Holdings Inc. (YUMC, Financial).
Pi Day is celebrated globally on March 14, the day that approximates Pi to two decimal places (3.14). The Greek letter represents the ratio of a circle’s circumference to its diameter. Further, the value holds for circles of any size.
The day also gives opportunities for people to recite the infinite digits of Pi, talk to friends about math and eat circular foods like pie and pizza. As such, investors can celebrate Pi Day by researching pizza stocks that are undervalued based on the GF Value measure. Patterned after Peter Lynch’s earnings line, GuruFocus’ exclusive valuation method considers a stock’s historical price multiples and adjusts for past performance and future business growth.
Domino’s Pizza
Shares of Domino’s Pizza (DPZ, Financial) traded around $305.95, showing the stock is significantly undervalued based on its price-to-GF Value ratio of 0.61 as of Tuesday.
During fiscal 2022, Domino’s Pizza generated $4.5 billion in total revenue, of which $2.9 billion were generated through supply chain operations, $1.5 billion were generated through U.S. stores and $295 million were generated through international markets.
The Ann Arbor, Michigan-based pizza chain has a GF Score of 93 out of 100 based on a rank of 10 out of 10 for profitability and growth, a GF Value rank of 8 out of 10, a momentum rank of 7 out of 10 and a financial strength rank of 3 out of 10.
Domino’s Pizza’s high profitability is driven by several positive investing signs, which include a five-star business predictability rank, a return on assets that outperforms approximately 98% of global competitors and an operating margin that outperforms over 90% of global restaurant companies.
The company’s growth ranks 10 out of 10 on the back of a three-year revenue growth rate of 13.3%, which outperforms more than 89% of global restaurant companies.
Despite high profitability and growth, Domino’s Pizza has a low financial strength rank of 3 out of 10 on the back of a poor Altman Z-score of 2.06 and an interest coverage ratio that underperforms over 60% of global competitors.
Gurus with holdings in Domino’s Pizza include Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Lee Ainslie (Trades, Portfolio)’s Maverick Capital.
Papa John’s
Shares of Papa John’s (PZZA, Financial) traded around $77.98, showing the stock is modestly undervalued based on its price-to-GF Value ratio of 0.82 as of Tuesday.
During fiscal 2022, Papa John’s generated $2.1 billion in total revenue, of which $869.6 million was generated in North America commissaries, $708.4 million was generated in domestic company-owned restaurants and $158.7 million was generated in international markets.
The Louisville, Kentucky-based pizza chain has a GF Score of 84 out of 100 based on a rank of 8 out of 10 for profitability and momentum, a GF Value rank of 7 out of 10, a growth rank of 6 out of 10 and a financial strength rank of 5 out of 10.
Papa John’s high profitability is driven by several positive investing signs, which include a return on assets that outperforms approximately 83% of global competitors and an operating margin that has increased by approximately 14.20% per year on average over the past five years.
Gurus with holdings in Papa John’s include Renaissance Technologies and Steven Cohen (Trades, Portfolio)’s Point72 Asset Management.
Yum Brands
Shares of Yum Brands (YUM, Financial) traded around $125.81, showing the stock is fairly valued based on its price-to-GF Value ratio of 0.94 as of Tuesday.
The Louisville, Kentucky-based company operates several restaurant brands, including Pizza Hut. During fiscal 2022, Yum Brands generated $6.8 billion in total revenue, of which $1 billion was from its Pizza Hut division.
Yum Brands has a GF Score of 83 out of 100 based on a rank of 9 out of 10 for momentum and profitability, a financial strength rank of 3 out of 10 and a rank of 6 out of 10 for growth and GF Value.
The company’s high profitability is driven by a return on assets that outperforms over 97% of global competitors and an operating margin that has increased by approximately 1.2% per year on average over the past five years and outperforms more than 97% of global restaurant companies.
Yum China Holdings
Shares of Yum China Holdings (YUMC, Financial) traded around $60.71, showing the stock is fairly valued based on its price-to-GF Value ratio of 1.07 as of Tuesday.
The Shanghai-based restaurant company operates several brands, including Kentucky Fried Chicken and Pizza Hut in China. During fiscal 2022, the company generated $9.6 billion in total revenue, including $2 billion in Pizza Hut sales.
Yum China has a GF Score of 69 out of 100 based on a profitability rank of 7 out of 10, a financial strength rank of 6 out of 10, a growth rank of 4 out of 10 and a rank of 3 out of 10 for momentum and GF Value.
The company’s profitability ranks 7 out of 10 on the back of operating margins outperforming approximately 70% of global competitors despite declining by approximately 7.5% per year on average over the past five years.
