The world's largest pizza chain, Domino's Pizza (NYSE:DPZ), has been the definition of a millionaire-maker stock over the past decade. A $34,000 investment on June 1, 2010, would be worth over $1 million today, even without reinvesting dividends along the way.

Long-term shareholders are undoubtedly happy with their returns thus far. But could Domino's Pizza serve up fresh millionaire-making returns over the next decade? To answer that question, we'll look at the stock's winning ingredients in the past, and consider whether any of those things still apply to the company's future.

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How Domino's made millionaires

In 2010, investing in Domino's would have been a contrarian move. From 2009 through 2010, the stock traded below sales, and its price-to-earnings ratio was consistently below 10. That cheap valuation reflected Wall Street's low confidence in Domino's business. After all, its pizza wasn't very good at the time.

Domino's admitted it had a poor product and launched a new pizza recipe in 2010. The company's sales soared as a result. In the U.S., it only added two net new restaurant locations from 2009 to 2010, but its U.S. retail sales grew 7%. Consider that, according to Statista, U.S. quick-service restaurant (QSR) pizza sales only grew 1.7% during this time. In other words, Domino's gained market share with an improved product, not new locations.

Equipped with a better pizza, Domino's was off to the races. From the start of 2011 through the end of 2019, the company's global restaurant count has gone up 82%, and its global retail sales have increased by 128%. Not only have sales increased, but the company is also more profitable. In 2010, the gross profit margin and net profit margin were just 28% and 6% respectively. In 2019, profitability was much improved, with a 39% gross profit margin and an 11% net profit margin. 

With its newfound cash, Domino's rewarded shareholders by systematically reducing its share count. At the end of 2010, it had 60 million shares outstanding. Now, it has fewer than 39 million -- a 35% reduction.

Better pizza, growing revenue, improving profits, and a reduction in share count all contributed to Domino's millionaire-making gains. However, this solid business execution also attracted investors' attention to the stock. It went from perpetually trading in the bargain bin to commanding the premium valuation of a top growth stock. It now trades at over four times sales, and over 36 times earnings -- pricey for a restaurant stock. But this increased valuation is another reason the stock is around a 30-bagger over the past decade. 

A pizza box is stuffed full of one hundred dollar bills.

Image source: Getty Images.

Can Domino's make more millionaires?

Most of what made Domino's a big winner over the past decade might still apply going forward.

Domino's growth plan, developed prior to the coronavirus, hasn't changed. It's targeting 25,000 locations and $25 billion in retail sales by 2025. That's 47% unit growth, and 75% retail-sales growth from the end of 2019, comparable to its growth pace over the past 10 years. Since Domino's employs a franchise operating model, higher retail sales deliver operating leverage for the company, improving profits. Furthermore, it's spent an average of $636 million annually on share buybacks the last four years, and it plans to keep reducing its share count going forward.

So Domino's can grow revenue and profits and reduce its share count. The final business key from the past was gaining market share by improving its pizza. That doesn't apply anymore. And it's fair to question how much more market share Domino's can take anyway. It already claims to have 15% of the global market share. 

But think about this. According to Domino's, the top four QSR pizza chains only have a combined 47% U.S. market share. That leaves a lot of small operations with a major slice of the, ahem, pie.

Restaurant-reservation company OpenTable's CEO believes 25% of U.S. restaurants could close in the next few months, and one would imagine pizza restaurants aren't immune. The circumstances aren't cheery, but Domino's could gain market share by filling the void.

Recent results give credibility to this hypothesis. Domino's preliminary results for the second quarter showed an outstanding 14% U.S. comparable-sales growth, even though sales for the restaurant industry were markedly down. Domino's, with its delivery-driven model and digital expertise, was built to withstand the COVID-19 challenge. Smaller competition isn't likely faring as well. So Domino's can indeed grab more market share. 

All of the ingredients are there for Domino's business to be a market-beating investment. But I'll stop short of calling the stock a millionaire-maker, especially over the limited time frame of the next 10 years. Part of Domino's stellar returns to date was by gaining a premium valuation, and I don't foresee that happening again since its valuation is already high.