By now it’s almost an urban myth, but several months ago a stock chart began making the rounds that showed Domino’s Pizza, Inc. (NYSE:DPZ) outperforming Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) since their respective IPOs around the same time in the summer of 2004.
I first caught wind of this remarkable comparison through a tweet by Pension Partners Director of Research Charlie Bilello, an award-winning technical analyst. If anyone’s going to get a chart right, it would probably be him.
In the 12.5 years since Alphabet and Domino’s went public, DPZ stock, at least according to the chart, has delivered a cumulative total return of 2,401% through the middle of January, 846 percentage points greater than GOOGL stock.
Unbelievable, right? A tech stock getting thrashed by a pizza stock — it hardly seems possible.
To be safe, I checked the Morningstar 10-year total returns for both stocks; you’ll find that Domino’s has generated an annual total return of 20.3% through Mar. 29, 847 basis points higher than GOOGL.
The numbers don’t lie.
Here’s why that imbalance isn’t going to change anytime soon.
GOOGL Stock vs DPZ: Simple Math
The first reason has nothing to do with Alphabet’s overall business model and everything to do with the fact momentum is very much on Domino’s side.
For GOOGL stock to pass DPZ stock on a cumulative basis since their respective IPOs, Domino’s stock would either have to flatline for a significant period, while Alphabet keeps chugging higher or Domino’s would have to completely collapse, falling back to meet Google’s performance, which by most standards isn’t too shabby.
Unfortunately, it doesn’t appear as though Domino’s stock is going to cooperate when it comes to flatlining or falling back. Year-to-date, DPZ stock is up 17%, more than 800 basis points clear of Google.
The reality is that ever since Domino’s introduced a new pizza recipe in late 2009, DPZ stock has been one of the best-performing mid-to-large-cap stocks on the New York or Nasdaq Composite stock exchanges.
Since January 1, 2010, only three stocks with market caps greater than $1 billion have delivered price appreciation greater than Domino’s at 2,092%. Of the list of 50 stocks presented by Quartz, GOOGL was nowhere to be found.
Pizza’s Not Going Out of Style
It certainly isn’t.
Last summer I said as much picking Domino’s as one of three restaurant stocks to avoid the restaurant recession analysts believed was slowly taking hold in the U.S. If you look at the 52-week total return for the restaurant industry versus both the S&P 500 and Domino’s — 11.7% for restaurants, 17.4% for S&P 500 and 41.7% for DPZ — you’ll see that analysts were correct in their assessment.
If you’re a GOOGL stock owner, you are not going to like the fact that Domino’s continues to deliver stellar results. On Mar. 9, Domino’s announced Q4 2016 comp sales growth of 13.7% at U.S. company-owned outlets, 12.1% growth for franchise outlets in the U.S. and international same-store sales growth of 4.3%.
Oh, and they also opened 1,281 restaurants globally in 2016, while also dominating the competition including Yum Brands, Inc. (NYSE:YUM), which has seen Pizza Hut lose market share to Domino’s in recent quarters.
Domino’s has a strong management team with a keen understanding how digital drives its business — 60% of U.S. sales in 2016 were from mobile devices — and that enables it to continue dominating the pizza business.
What About GOOGL Stock?
Hey, I don’t think there’s anything wrong with Alphabet stock. I’ve written several articles in recent months suggesting investors want to own GOOGL stock, including this one in December where I called it a must-own stock for 2017.
I was especially enthusiastic about its stock because of the hiring of Ruth Porat as CFO who’s reigned in spending while avoiding choking innovation, the lifeblood of any tech company.
InvestorPlace contributor Bret Kenwell thinks GOOGL stock is fairly valued at the moment, making it a good time to buy the stock and I tend to agree. It’s got a lot of good things going for it; I just don’t know if it’s enough to keep up with the growth happening at Domino’s.
If you can afford to buy both stocks, I would. But if you can only buy one, I’d go with Domino’s — its growth story is still very much intact.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.