Finding a company with Durable Competitive Advantage: Domino´s Pizza Group plc Value Investing. Autumn 2013

Author: Jero R. Marin. September 2013 Introduction Domino´s Pizza Group PLC (DPG) is the UK and Ireland's leading pizza delivery company and holds the master franchise to own, operate and franchise Domino's Pizza stores in these markets and also in Germany and Switzerland. It is a company based in UK and it …show more content…
The next step I´ve taken has been: identify those companies with a business model I think I can understand. It would be impossible to assess the existence of a durable competitive advantage if we are out of our “circle of competence”, which is defined by the type of business models that we , from our expertise, are able to understand from a “five forces” framework. In this sense, Dominos Pizza Group PLC is a company with a business model understandable by this analyst. 3. Quantitative evidence of Sustainable Competitive Advantage 1. Rates of growth in sales, gross profit margin and ROE. In Ex.3 it is quite clear that DPG has been able to grow in sales and profit margins and maintain a high ROE: a. From these growth rates in sales and profit margins we can deduct that the company has been able to identify a market niche (see industry map in Ex. 6) and capture not only a significant part of the growth of this market but also the fact the it´s increasing profit margins means that it is having a significant pricing power over this market. b. A high ROE with a reasonable high ROA means that the company is achieving this growth with an efficient use of the capital employed. 2. Increasing market share relative to the whole Quick Service Restaurants and Restaurants & Bar sector in the UK during the last 3 years. As shown in Ex. 4, has been growing relatively more than the market size, so although still very low, its market share of the whole low serviced restaurant industry