Is Now The Time To Look At Buying The Home Depot, Inc. (NYSE:HD)?

The Home Depot, Inc. (NYSE:HD) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$239 at one point, and dropping to the lows of US$212. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Home Depot’s current trading price of US$228 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Home Depot’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Home Depot

Is Home Depot still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10% below my intrinsic value, which means if you buy Home Depot today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $254.32, then there isn’t much room for the share price grow beyond what it’s currently trading. What’s more, Home Depot’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Home Depot?

NYSE:HD Past and Future Earnings, February 3rd 2020
NYSE:HD Past and Future Earnings, February 3rd 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 16% over the next couple of years, the outlook is positive for Home Depot. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? HD’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on HD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Home Depot. You can find everything you need to know about Home Depot in the latest infographic research report. If you are no longer interested in Home Depot, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.