Down 5.54% so far in 2025, Domino's Pizza Enterprises Ltd (ASX: DMP) shares have fallen more than 35% over the past 12 months.

While there have been a few outsized daily gains this calendar year, investors still appear to have doubts about the S&P/ASX 200 Index (ASX: XJO) fast food pizza retailer's turnaround strategy. A strategy intended to build capital and return Domino's to a long-term growth path.

With an eye on that strategy, however, Family Financial Solutions' Jabin Hallihan believes the sell-off in Domino's shares has been overdone (courtesy of The Bull).

Here's why.

Domino's shares 'significantly undervalued'

"The fast food giant has a significant presence in Australia, Europe and Japan," said Hallihan, who has a buy recommendation on Domino's shares.

"The company is closing 205 unprofitable stores, mostly in Japan, to improve profitability," he noted.

The pizza retailer announced those closures on 7 February. Of the 205 stores it's shuttering, 172 are in Japan (58 franchised, 114 corporate).

The company said it expects the closures to boost earnings before interest and tax (EBIT) by $10 million to $12 million a year. The closures are expected to incur one-off restructuring costs of $61.8 million.

Domino's shares closed up 21.3% on the day of that announcement.

As for the H1 FY 2025 profits, reported this Tuesday, Hallihan said last week, "Group underlying net profit before tax is expected to range within guidance of between $84 million and $86 million in the first half of fiscal year 2025."

Indeed, Domino's underlying net profit before tax for the six months to 31 December came to $85.6 million.

With this picture in mind, Hallihan concluded, "In our view, the shares are significantly undervalued and present an opportunity to buy Domino's at a discount."

What's been happening with the ASX 200 stock's reset plan?

Commenting on the Japanese store closures that sent Domino's shares surging earlier this month, CEO Mark van Dyck said:

Japan is an attractive market for Quick Service Restaurants and pizza, with significant long-term upside for Domino's. Some of our COVID-period expansion resulted in stores that simply weren't optimal based on our current customer proposition and removing them will strengthen our network.

We are committed to being disciplined in expansion — prioritising locations in high density prefectures where we can drive incremental, profitable growth.

Following this week's H1 FY 2025 results announcement, van Dyk noted:

Our recent decision to close 205 loss-making stores, including 172 in Japan, should demonstrate we will take the steps we need to provide the venture capital to reinvest in sustainable, long-term growth.