Believe it or not, Domino's Pizza (DPZ 0.44%) has been one of the best-performing stocks of the last decade.

The pizza chain has gained more than 1,600% thanks to a commitment to reformulate its recipes back in 2009 and steady investments in technology to allow customers to order through multiple digital channels and enable the company to track orders, in addition to other benefits. Its tech investments have also made internal operations more efficient, and the company has transformed itself from a traditional pizza chain to an e-commerce business that sells pizza.

The success of that strategy is evident. In addition to the stock performance, the company has reported 40 consecutive quarters of same-store sales growth in the U.S. and 109 consecutive quarters internationally, or more than 27 years without a decline in comparable sales outside of the U.S. That shows how dominant the Domino's brand has been globally.

Still, past performance isn't a guarantee of future returns, and the restaurant industry is changing quickly. Let's take a look at where Domino's stands today to determine whether or not it's a buy.

A Domino's storefront with two people looking out the street-facing window.

Image source: Domino's.

Domino's in 2021

Like most restaurant-delivery operations, Domino's was a big winner during the pandemic. For 2020, same-store sales increased 11.5% in the U.S. and 4.4% internationally as the company faced mandatory store closures in some of the countries in which it operates. Overall, the collapse of dine-in restaurant visits provided a tailwind for Domino's. Adjusted earnings-per-share growth for the year was strong, rising 25% to $12.01.

Those trends continued into the first quarter with same-store sales rising by double digits both in the U.S. and internationally. Pre-tax income rose 27% to $149.6 million.

Management did not offer guidance for the rest of the year but reiterated its two- to three-year outlook of 6% to 8% annual net-store growth and 6% to 10% annual retail-sales growth. Given the company's momentum and market share gains coming out of the pandemic, that outlook seems very achievable. The company should continue to gain leverage on the bottom line thanks to its franchise model, meaning investors should expect double-digit earnings-per-share growth, especially as the company continues to buy back stock.

Domino's also continues to innovate, having recently partnered with autonomous vehicle company Nuro to test autonomous pizza delivery, which has the potential to save the company and its franchisees on driver expenses, which is key as labor shortages are likely to persist.

Key metrics

Domino's is the leading global pizza chain based on sales, ahead of rivals like Papa John's and Yum! Brands' Pizza Hut, and it has nearly 18,000 locations around the world. Pizza has also proven to be a popular food globally, is well suited to delivery, and has a lower price point than many other restaurant foods, helping to make Domino's more recession-proof than some other competing restaurant chains might be.

The company currently trades at a price-to-earnings (P/E) ratio of 34, which compares to a P/E of 44 for the S&P 500.  Papa John's, the company's closest peer, trades at a P/E valuation of 48, making Domino's look relatively cheap according to both the broad market and its top rival.

It's more difficult to assess Domino's management team. On Glassdoor, the company rates a modest 3.5 stars out of 5, and only 62% of respondents said they'd recommend working there to a friend. Seventy per cent of respondents said they approve of CEO Ritch Allison, who took over in 2018. However, considering that most of the company's locations are franchised and that it's a global business, employee ratings are probably less important than they would be for, say, a big tech company.

Domino's also offers a dividend, paying a modest yield of 0.9% currently. The company has raised the payout by 18% more every year since 2013, making it a promising candidate for dividend growth.

Is it a buy?

Domino's combines a track record of outperformance with a timeless product and business model, and a reasonable valuation. Coming out of the pandemic, it should also see some benefits from market share gains.

While the stock is unlikely to repeat the fireworks it experienced a decade ago when it first set out on its turnaround strategy by changing its pizza recipe, the restaurant stock still looks like a solid bet to outperform the S&P 500. If you're looking for a stock that offers growth, income, a recession-proof business model, and a reasonable valuation, Domino's looks like a great choice.