The Domino's Pizza (NYSE:DPZ) turnaround from most-hated to beloved pizzeria rightly attracts investor attention. Having admitted its past mistakes, Domino's embarked on a path of correcting them, and it has paid off with consolidated sales of more than $1.8 billion in 2013, up 7% from the year before.

With third quarter revenues 10.5% higher than last year, here's the good, the bad, and the ugly investors need to know before putting their money in Domino's.

The good
Domino's is the No. 1 pizza delivery company in the U.S., with a 23.6% share of the market. Domino's also operates a global enterprise of more than 11,000 stores in more than 70 countries, virtually all of which are franchised. Including their revenues, Domino's had total revenues of around $8 billion last year. In a recent earnings report, Domino's had a quarter of higher than expected comps that grew 7.7% from last year -- well ahead of the better than-5% growth it achieved in the year ago period.

Trailing behind Domino's, the global Yum! Brands (NYSE:YUM) Pizza Hut chain has almost 13,400 restaurants worldwide and some $5.7 billion in annual revenues, which dwarfs the third place rival Papa John's Pizza (NASDAQ:PZZA), which had $2.9 billion in revenues.

Pizza

Domino's Pizza comps are bubbling hot these days. Data: Company quarterly SEC filings.

The bad
According to Technomic's Pizza Consumer Trends Report, three-quarters of U.S. consumers eat pizza twice at least per month, but NPD Group says the industry is only expected to grow 2% this year, down from 2.3% in 2013 and below the 3.7% growth it achieved the year before.

Analysts expect slower growth from Domino's Pizza as well. Although ahead of the industry with a 9% revenue growth forecast for 2014, analysts expect Domino's to reach only 5.5% revenue growth in 2015. Earnings, though, will be more stable, with per-share profits expected to jump more than 18% in 2014 and 17% next year. 

Despite Domino's industry lead, however, Papa John's generates more sales from each restaurant than does Domino's even though Papa John's is nearly a quarter of its size.

Pizzeria

Systemwide Sales (millions)

Avg. Sales per Unit (000)

U.S. Franchised Units 

Company-Owned U.S. Units 

Total U.S. Units 

Y-Y Unit Growth

Pizza Hut

$5,700.0

$861.0

7,355

491

7,846

1.1%

Domino's Pizza

$3,800.0

$762.1

4,596

390

4,986

1.2%

Little Caesars *

$3,025.0

$800.0

3,310

580

3,890

5.9%

Papa John's

$2,494.8

$837.0

2,542

665

3,207

2.4%

Papa Murphy's *

$779.7

$577.0

1,327

69

1,396

5%

Source: *Some data based on Technomic estimates. All data is 2013 from QSR Magazine. 

The ugly
Traditional pizza shops are being confronted by the rise of fast-casual chains. Even though fast-casual restaurants comprise just 14% of the total $223 billion limited-service dining segment, their growth is outpacing both the quick-serve and full-service segments. Analysts see pizza as a natural extension of the concept.

Technomic suggests made-to-order pizza could be huge because it already uses fresh, gourmet ingredients that capitalize on the best "health and wellness concepts" found in fast casual dining leaders like Chipotle Mexican Grill (NYSE:CMG)

Indeed, the fast-casual leader tired of other players claiming to be "the next Chipotle of pizza," and invested in a pizza shop itself that's modeled after its own dining concept. Chipotle is growing out the Pizzeria Locale chain that directly challenges traditional pizza shop business models.

Among those who are pursuing the fast-casual concept in pizza include the recently IPO'd Papa Murphy's (NASDAQ:FRSH), Blaze Pizza, Pie Five, and PizzaRev. Any of these competitors could capitalize on Domino's consistent shortfalls in consumer satisfaction surveys, which dropped year over year in the latest review.

Screen Shot

Data: The American Customer Satisfaction Index

Slicing up the market
Despite challenges facing Domino's, I still view it as a good investment. Fast-casual chains may take a bite or two from its slice of market share, but that's because such outlets are in vogue now. Industry demographics point to traditional pizza places like Domino's Pizza or the corner pizza joint doing well in the long run.

Screen Shot

The data above indicate the majority of pizza eaters are males between ages six and 19 -- not exactly the demographic of those just discovering "nouveau pizza." Of course it's this next generation of kids that followed the so-called millennials -- the iGeneration they've been dubbed -- that some researchers think will quickly latch onto the customization options a fast-casual, build-your-own pizza would offer.

Domino's, though, is still growing sales and winning share in the marketplace. Like pepperoni added to a cheese pie, that should keep it on top of the pizza industry.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill and Papa John's International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.