4 Ways That Papa John's Is Beating Domino’s

Domino's Pizza (NYSE: DPZ  ) is "recognized as the world leader in pizza delivery," but Papa John's (NASDAQ: PZZA  ) isn't exactly a slouch. Domino's does have nearly two and a half times as many locations as Papa John's does, but several interesting metrics have Papa John's in the lead.


Source:  Papa John's

Growth in all directions
Last quarter, Domino's Pizza topped Papa John's by a bit on international same-store sales growth at 7.4% compared to 6.4% for Papa John's. For domestic same-store sales, it wasn't even close. Papa John's had nearly double the same-store sales growth rate at 9.6% compared to 4.9% for Domino's. Overall net units grew by 6.4% and 5.6% for Papa John's and Domino's Pizza, respectively.

Domino's growth in the quarter partially came from its new Handmade Pan Pizza. Papa John's had a Double Cheeseburger Pizza promotion that appears to have had a larger impact on its chain. Anthony Thompson, COO of Papa John's, stated on the conference call that Papa John's was able to command a premium while "the competition remained at a lower price point."

In light of the price premium that Papa John's was able to command, Thompson took a stab at Domino's. He stated that Papa John's is the recognized quality leader, which is a poke at Domino's calling itself the recognized leader in pizza delivery. Quality is better than quantity, right?


Source:  Papa John's

Getting all of the digits
One of the reasons for the faster ongoing domestic growth of Papa John's is that the chain is the top dog when it comes to digital expertise. John Schnatter, CEO of Papa John's, stated in the company's latest press release, "We will also continue to capitalize on digital expertise, with our industry-leading digital sales mix approaching 50% of total sales and almost 60% of all delivery sales." Domino's, of course, comes in second in this area.

Papa John's is proud to have beaten Domino's Pizza to become the first national chain with systemwide digital ordering 13 years ago. Today, it's still the leader. Papa John's is striving to break the barrier of more than half of its sales coming from digital ordering. Neither company has seen any evidence of its digital sales growth slowing down any time soon.


Source:  Papa John's

Show me da money
Papa John's doesn't have the best balance sheet in the world, but it does have positive shareholder equity. Domino's Pizza, on the other hand, is in the hole by well over $1.3 billion. It has had no problem servicing its debt, but Papa John's has a superior financial position that makes more of its long-term earnings available for return to shareholders in the form of dividends and share buybacks. Since both companies pay similar dividend yields in the 1% range, the advantage here goes to Papa John's.

Valuation
Papa John's trades at a slightly lower price than Domino's Pizza going by analysts' estimates. Papa John's trades at a P/E of 23.6 based on its current share price and estimated earnings per share of $1.74 for the year ending December 2014 and a P/E of 20.1 based on EPS of $2.04 for the year ending December 2015.

Domino's Pizza trades with P/E ratios of 25.1 and 21.7 based on its current share price and EPS of $2.84 and $3.28 for the years ending December 2014 and 2015, respectively. While the difference in P/E ratios between the companies isn't enormous, a superior balance sheet and faster recent growth give the valuation advantage to Papa John's.

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