My love of pizza is not all that different from Homer Simpson's love of Duff beer. Still, even I get a kick out of the lead sentence in Domino's Pizza's
With the stock up by more than 7% in midday trading, investors obviously believe that the company delivered strong results. Earnings per diluted share were $0.30, up 30% versus last year's performance, and total sales increased 3.9%. Domino's managed to increase its EPS more quickly than sales by driving better operating margins in the stores; reducing selling, general, and administrative (SG&A) expenses; and lowering interest expense.
Same-store sales were up across the board in the quarter. The international side of the business turned in the best performance, with a 4.5% increase on top of a strong 5.9% gain last year. The domestic stores, in contrast, turned in a meager 1.1% increase, but that's against a very strong 8% gain a year ago.
Domino's still maintains a large amount of long-term debt on its balance sheet, but its ability to fund that debt seems solid. Its free cash flow through the first three quarters of the year is strong, and its interest coverage ratio (earnings before interest and taxes divided by interest expense) in the most recent quarter improved to 3.89 from 1.66 in the same quarter last year.
With a trailing P/E of around 21, the valuation for Domino's is not all that different from that of competitors Papa John's International
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