This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

June 11, 2010 - Domino's Pizza, Inc. (DPZ-NYSE) through its subsidiaries, operates as a pizza delivery company in the United States and internationally. The company sells and delivers pizzas under the Domino's Pizza brand name. As of January 3, 2010, it operated a network of 466 company-owned stores located in the United States; and 8,533 franchise stores located in 50 states and approximately 60 international markets. It also has 23 dough manufacturing and distribution centers. The company was founded in 1960 and is headquartered in Ann Arbor, Michigan.

Pizza sales were down in the last 2 years at Domino's. In 2007, they hit $1.463 billion but then cooled to $1.425 billion in 2008, followed by an even cooler 2009 at $1.404 billion. But analysts see that changing. For 2010, 9 analysts have a consensus estimate of $1.51 billion, up 7.40%, then a little higher next year at $1.54 billion.

Earnings followed almost the same path but only for 1 year. In 2007, they were $1.03, then went to 75 cents a share. Last year, they rebounded to 87 cents. This year, 12 analysts forecast a consensus estimate of $1.23 (up 41%), then $1.34 in 2011. Next earnings report will be in July for the second quarter. Look for 28 cents a share, up from 21 cents in the second period last year. In the third, expect 24 cents vs. 17 cents.

The stock price followed the earnings. It reached an all-time high of $35.70 in early 2007, then fell like a stone in water, reaching a low point of $2.60 in late 2008. Since then, it's been on an upward path, recently trading at $16.30 before backing down to its current level.

The company has been cutting costs, lowering its Selling, General & Administrative (SG&A) expenses, as a percentage of sales. It's also seeing lower food prices. Operating margins should show improvement from these and other positive factors such as lower interest costs.

That last portion is important. Interest costs could be very high for DPZ. Total debt is $1.52 billion. So there's high leverage here. That can make earnings soar when times are good (and rates are low) or it can eat up any profits quickly. That's the big X factor in buying DPZ: while its business may be doing well, if interest rates zoom higher, debt payments will rise substantially. All debt is due within 5 years.

Look for more growth here. The company expects to add between 40 and 50 new units internationally each quarter, net of all closings due to underperformance. There's plenty of room for new stores in Europe, Asia and Latin America. While opportunities are strong overseas, the domestic market is almost saturated and may see shrinkage rather than expansion.

More numbers: Trailing P/E is 9. Price to sales is .49. Book value is negative $21.83. Return on equity is negative. Return on assets is a remarkable 27.81%. Total cash per share is 47 cents. Current ratio is 1.56. Beta is 1.31. There are 59 million shares outstanding. Insiders own 9.16%. Institutions have 81.40%. There is no dividend.

Aggressive investors will find this stock intriguing: it's highly leveraged, earnings are about to jump significantly, and growth is a focus for management. Now if only food prices stay low as well as interest rates, everything should be just fine. That's a big IF, especially if the economy starts to heat up and inflation becomes a concern for the Fed. Interest rates won't stay at these levels for long.

- Company Web site: www.dominos.com

- Ted Allrich