What happened

The leading pizza brand hushed the skeptics once again by delivering a better-than-expected second-quarter earnings report. Shares of Domino's Pizza (NYSE:DPZ) were up 10.5% week to date as of 1:07 p.m. EDT on Thursday. 

The gain comes on top of market-beating performance year to date, with the stock currently up 39% on the year vs. the S&P 500 index's return of 16%.

DPZ Chart

DPZ data by YCharts

So what

Domino's delivered consistent same-store sales growth over the last decade, and the pandemic didn't slow it down. It opened 624 stores in 2020 and finished a challenging year with sales and adjusted earnings per share (EPS) rising 10% and 25%, respectively. 

The second quarter of 2021 was another good one, as sales came in above estimates at $1.03 billion, or an increase of 12.2% year over year. Adjusted EPS grew 4.3% to reach $3.12, beating the consensus analyst estimate of $2.87. The company said the lower EPS growth was due to a higher provision for income taxes.

Overall, it's impressive to see Domino's continuing to post double-digit increases in sales on top of strong growth during the pandemic. Investors were not expecting the company to maintain this momentum, which explains why the stock is up nearly 14% in Thursday's trading.

A group of friends eating pizza.

Image source: Getty Images.

Now what 

Domino's recently opened its 18,000th store, but its growth doesn't appear to be over. Management sees a big opportunity to increase market share in the quick-service restaurant market, which is still very fragmented. Despite Domino's leadership position, it only commands 22% of the total QSR pizza category, while other pizza chains have 30% share.

The stock has been a home run for investors in recent years, but the valuation is high right now at 41 times forward earnings estimates. Investors should lower their expectations for more gains in the near term, but this is a best-of-breed restaurant stock to keep on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.