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Looking at The Home Depot, Inc.’s (NYSE:HD) earnings update in February 2019, it seems that analyst forecasts are fairly bearish, as a 0.3% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 13%. Currently with a trailing-twelve-month profit of US$11b, the consensus growth rate suggests that earnings will drop to US$11b by 2020. Below is a brief commentary around Home Depot’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
What can we expect from Home Depot in the longer term?
The 29 analysts covering HD view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for HD, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of US$11b and the final forecast of US$13b by 2022, the annual rate of growth for HD’s earnings is 5.1%. EPS reaches $11.96 in the final year of forecast compared to the current $9.78 EPS today. Margins are currently sitting at 10%, approximately the same as previous years. With analysts forecasting revenue growth of 0.12633 and HD’s net income growth expected to roughly track that, this company may add value for shareholders over time.
Future outlook is only one aspect when you’re building an investment case for a stock. For Home Depot, there are three essential factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Home Depot worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Home Depot is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Home Depot? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.