Will Domino's Pizza Recover Its Momentum: A Valuation and Growth Analysis for 2026

The Performance Puzzle: Why Market Sentiment Shifted

Domino’s Pizza (NASDAQ: DPZ) presents an intriguing paradox in the investment landscape. While the S&P 500 surged 16.4% through 2025, the pizza delivery giant remained essentially flat—down just 0.6% for the year. This underperformance marks a stark departure from the company’s historical track record: over the past decade, Domino’s has delivered 280% returns compared to the S&P 500’s 232%.

The culprit? Decelerating growth has shifted investor sentiment from euphoria to caution. Global same-store sales growth contracted to 5.5% through the first nine months of 2025, down from 6.5% in the prior year. The domestic market painted an even bleaker picture, with U.S. same-store sales expanding at just 2.7% versus 4.5% in 2024.

This deceleration hit a stock previously trading at premium valuations. Mid-2024 saw Domino’s commanding a price-to-earnings (P/E) ratio exceeding 34x—a lofty multiple for any quick-service restaurant. When growth falters from those heights, gravity inevitably takes hold.

Market Context: Broader Industry Headwinds

Domino’s isn’t navigating these challenges alone. Across the restaurant sector, consumer spending has contracted as inflation and elevated living costs squeeze household budgets. Yet this environment reveals Domino’s competitive strengths: pizza remains among the most affordable group meals available, positioning the franchise to capture share from struggling competitors during lean times.

Understanding Domino’s financial structure requires examining how the company finances growth—much like analyzing a gearing ratio formula reveals leverage and capital efficiency. Domino’s asset-light franchise model generates cash without requiring proportional capital expenditure, a structural advantage competitors lack.

The Institutional Vote of Confidence

The valuation reset has fundamentally altered the investment thesis. Trading now at a P/E ratio below 25x—approximately 25% beneath its decade-long average—Domino’s has transformed from expensive to reasonably priced.

Berkshire Hathaway, under Warren Buffett’s stewardship, has become a notable believer. The investment giant initiated a position in Q3 2024 and has methodically accumulated an 8.8% stake worth $1.2 billion, adding shares each subsequent quarter. For a company famously disciplined about capital allocation and currently raising cash rather than deploying it broadly, this sustained buying signal carries weight.

Forward-Looking Economics and 2026 Prospects

Analyst consensus projects earnings growth of 10-11% annually over the next three to five years—meaningful expansion from a modestly valued base. Incorporating dividend yield, this translates to 12-14% annualized total returns, even assuming current valuation multiples persist.

The underlying business model remains fundamentally intact. Domino’s operates a well-established franchise platform within a highly fragmented pizza industry offering genuine global appeal. In the United States specifically, the landscape features thousands of independent operators struggling to match Domino’s technological capabilities, pricing efficiency, and operational scale.

These structural advantages suggest the deceleration represents a cyclical headwind rather than terminal business decay. Revenue growth may accelerate as consumer confidence stabilizes or discretionary spending rebounds—both plausible scenarios as 2026 unfolds.

The Verdict: Setup for Normalized Performance

The stock’s current positioning looks materially more attractive than twelve months prior. With valuation no longer a headwind and the franchise model producing predictable returns, Domino’s appears positioned to transition from underperformer to steady compounder in 2026 and beyond.