DISCOUNTED CASH FLOW VALUATION OF DOMINO'S PIZZA, INC.

Abstract

The purpose of this valuation report is to find the target price of Domino’s Pizza, Inc (DPZ), the well-known chained pizza brand, by using the discounted cash flow for the upcoming four years, 2021 to 2025, and the present value of the terminal value at the end of 2025. After analyzing the drivers of DPZ’s cash flows, which are royalty fees and profit from the supply chain, the projection for its sales for the next four years has a CAGR of 6%. With a cost of capital of 4.25% and a terminal growth rate of 1.15%, the target price of DPZ at the end of 2021 is 538.4 dollars which is 4.7% upside from the current price of 514.5 dollars. As the valuation result, via taking into consideration DPZ’s past outstanding performance compared to the market and its peers, the positive relationship between GDP growth and per capita consumption in the foodservice industry, and the high base years that DPZ has built, the investment recommendation is to “hold.” Nevertheless, the limitation and triggers