2-Star Stocks Poised to Plunge: Domino's Pizza?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, pizza delivery company Domino's Pizza (NYS: DPZ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Domino's and see what CAPS investors are saying about the stock right now.

Domino's facts

Headquarters (Founded)Ann Arbor, Mich. (1960)
Market Cap$1.8 billion
IndustryRestaurants
Trailing-12-Month Revenue$1.6 billion
ManagementCEO Patrick Doyle (since 2010)
CFO Michael Lawton (since 2010)
Return on Capital (Average, Past 3 Years)54.8%
Cash/Debt$32.1 billion / $1.5 billion
CompetitorsLittle Caesar Enterprises
Papa John's International
Yum! Brands

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 20% of the 389 members who have rated Domino's believe the stock will underperform the S&P 500 going forward.

Earlier this month, one of those Fools, Naxias, seriously questioned Domino's valuation:

Today this stock is at a P/E [around 21]. Its share price in 2011 rose considerably while the SP500 stayed flat. It begs the question as to why. Yes, it has a strong brand. Yes, it has a lot of stores. But have you seen the balance sheet? Have you tasted their "improved" (i.e. sweetened) product? There is a lot of competition out there, and I can think of many other companies that use their money more wisely and deliver a better product in the restaurant sector.

What do you think about Domino's, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Want to see how well (or not so well) the stocks in this series are performing? Follow the newTrackPoisedToCAPS account.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Yum! Brands. Motley Fool newsletter services have recommended buying shares of Yum! Brands. 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 Fool's disclosure policy always gets a perfect score.

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