At US$356, Is The Home Depot, Inc. (NYSE:HD) Worth Looking At Closely?

The Home Depot, Inc. (NYSE:HD) received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Home Depot’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Home Depot

What Is Home Depot Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 12.82% above our intrinsic value, which means if you buy Home Depot today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $315.27, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Home Depot’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Home Depot?

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. Though in the case of Home Depot, it is expected to deliver a relatively unexciting earnings growth of 7.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in HD’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on HD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.

So while earnings quality is important, it's equally important to consider the risks facing Home Depot at this point in time. At Simply Wall St, we found 1 warning sign for Home Depot and we think they deserve your attention.

If you are no longer interested in Home Depot, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.