Fast-food pizza chain Domino’s (NYSE:DPZ) missed analysts' expectations in Q4 FY2023, with revenue flat year on year at $1.40 billion. It made a GAAP profit of $4.48 per share, improving from its profit of $4.43 per share in the same quarter last year.

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Domino's (DPZ) Q4 FY2023 Highlights:

• Revenue: $1.40 billion vs analyst estimates of $1.42 billion (1.3% miss)

• EPS: $4.48 vs analyst estimates of $4.40 (1.9% beat)

• Free Cash Flow of $122.6 million, down 22.7% from the previous quarter

• Gross Margin (GAAP): 38.4%, up from 36.8% in the same quarter last year

• Same-Store Sales were up 2.8% year on year

• Store Locations: 20,591 at quarter end, increasing by 711 over the last 12 months

• Market Capitalization: $15.13 billion

"Our strong fourth quarter demonstrates that our Hungry for MORE strategy is already delivering results. This strategy, which we recently unveiled at our Investor Day, is our plan to deliver MORE sales, MORE stores and MORE profits," said Russell Weiner, Domino's Chief Executive Officer.

Founded by two brothers in Michigan, Domino’s (NYSE:DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.

Traditional Fast Food

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Sales Growth

Domino's is one of the larger restaurant chains in the industry and benefits from a strong brand, giving it customer mindshare and influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 5.5% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was weak , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.

This quarter, Domino's revenue grew 0.8% year on year to $1.40 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 7.6% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Same-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.

Domino's demand within its existing restaurants has barely risen over the last eight quarters. On average, the company's same-store sales growth has been flat.

In the latest quarter, Domino's same-store sales rose 2.8% year on year. This growth was an acceleration from the 1.8% year-on-year increase it posted 12 months ago, which is always an encouraging sign.

Key Takeaways from Domino's Q4 Results

Although Domino's missed analysts' revenue estimates this quarter, we were glad its EPS beat expectations. The lower revenue was caused by fewer store openings than expected (394 new stores vs estimates of 433) while the higher profitability was driven by outperformance in its U.S. same-store sales growth, which clocked in at 2.8%, marking an acceleration from its 1.6% growth for all of 2023.

Furthermore, the company's Board approved a 25% increase in its quarterly dividend to $1.51 per share and granted an additional $1.0 billion for its share repurchase program. Lastly, on December 7, 2023, the company shared its long-term estimates at its Investor Day; management forecasts 7%+ annual retail sales growth, 1,100+ annual net store additions, and 8%+ annual operating income growth for the foreseeable future.

Overall, this was a mediocre quarter for Domino's, but the market is likely happy about the company's accelerating U.S. same-store sales growth. The stock is up 5.4% after reporting and currently trades at $457 per share.

So should you invest in Domino's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.