| Snowflake Score | |
|---|---|
| Valuation | 3/6 |
| Future Growth | 2/6 |
| Past Performance | 3/6 |
| Financial Health | 2/6 |
| Dividends | 5/6 |
HD Stock Overview
The Home Depot, Inc. operates as a home improvement retailer.
Home Depot Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$309.69 |
| 52 Week High | US$420.61 |
| 52 Week Low | US$264.51 |
| Beta | 0.99 |
| 1 Month Change | 8.11% |
| 3 Month Change | 4.26% |
| 1 Year Change | -6.11% |
| 3 Year Change | 47.46% |
| 5 Year Change | 99.96% |
| Change since IPO | 16,512.47% |
Recent News & Updates
Should You Investigate The Home Depot, Inc. (NYSE:HD) At US$299?
The Home Depot, Inc. ( NYSE:HD ) saw a decent share price growth in the teens level on the NYSE over the last few...
Ensemble Capital Management - Home Depot: Remodeling Boom
Home Depot's focus is on home remodeling, not housing transactions. We expect the remodel demand to remain solid. Our analysis indicates that the 50% of Home Depot revenue that comes from Do-It-Yourself homeowners has already fallen back to normalized levels. The following segment was excerpted from this fund letter. Home Depot (HD) Home Depot is a very different business from NVR and First American. Its focus is on home remodeling, not housing transactions. Historically, the level of interest rates has not had a material influence on demand for Home Depot’s products and services. With employment at very strong levels, households sitting on record levels of cash, home equity at all-time highs, and existing homeowners having locked in low, fixed mortgage payments during 2020-2021, we expect remodel demand to remain solid. Certainly, after the boom in remodeling over the past two years, Home Depot is likely to see growth decelerate, as was already expected coming in to 2022. And growth may be hard to find over the next year or two. But for homeowners who wish to move, but no longer can due to high interest rates on new mortgages, remodeling their existing home to better fit their needs is the next best option. Importantly, our analysis indicates that the 50% of Home Depot revenue that comes from Do-It-Yourself homeowners has already fallen back to normalized levels after surging dramatically in 2020 when people were stuck inside during COVID. The other 50% of revenue comes from professional contractors. This segment continues to boom, growing at an estimated 20% in the most recent quarter ending on April 30th. With homeowners desiring a remodel being forced to wait until 2023 due to extremely long backlogs of job activity, it appears very likely that strong remodeling activity will persist.
Is There An Opportunity With The Home Depot, Inc.'s (NYSE:HD) 27% Undervaluation?
In this article we are going to estimate the intrinsic value of The Home Depot, Inc. ( NYSE:HD ) by taking the expected...
Home Depot's Stock Decline May Have Only Just Begun
Earnings estimates for Home Depot appear to be too high. Analysts see earnings growing much faster than revenue and operating profits. Someone is making a big bet that Home Depot's stock will see a big drop. This story was written on July 5 for subscribers of Reading The Markets. It has been updated as of the evening of July 10, where italicized along with the technical chart. Home Depot (HD) shares have plunged in 2022 due to soaring interest rates which have helped to slow the housing market. On top of that, higher inflation rates have eaten away at some of Home Depot's gross margins and made those margins much more volatile over the past year. Estimate Discrepancies Despite a weakening housing market and reported margin volatility, analysts' earnings estimates for Home Depot's fiscal 2023 and 2024 are holding up. Analysts are forecasting earnings for Home Depot to rise to $16.62 per share in 2023 and $17.59 in 2024. That is a growth rate of 7.02% in 2023 and 5.79% in 2024. Bloomberg Even sales estimates for Home Depot continue to rise. By 2023 analysts see sales reaching $156.79 billion and $161.76 billion in 2024. That would suggest that revenue in 2023 will grow by 3.73% and 3.17% in 2024. Bloomberg Meanwhile, analysts see gross margins staying around 33.6% in both 2023 and 2024. That is roughly flat to where gross margins had been in fiscal 2022 when they were at 33.62%. What is strange is that revenue growth is expected to be much slower than earnings growth, which would suggest analysts see margins expanding somewhere, and based on gross margins estimates, it isn't evident to be true. Bloomberg Operating profits are forecast to rise by 4.26% in 2023 to $24.02 billion and another 3.54% in 2024 to $24.87 billion. Again, this growth rate is expected to be faster than revenue growth in both years, pointing to operating margin expansion, suggesting that analysts see costs coming down somewhere. Bloomberg What is odd here is that earnings growth is still much higher than operating profit growth. That would suggest that analysts' earnings estimates are too high or that the company will be buying back enough stock in the coming two years to deliver earnings growth that exceeds revenue growth and operating profit growth. A Big Bet The Shares Fall The discrepancy in estimates is leading someone to make a very aggressive and bearish bet on Home Depot. On July 5, the open interest for the August 19, $210 puts, increased by roughly 22,300 contracts. The data shows that the put contracts were bought on the ASK for $1.34, implying Home Depot is trading at or below $208.66 by the expiration date. That would be a massive decline in Home Depot stock from its current price of about $277 on July 5. It is also a big wager with nearly $3 million premiums paid. The odds of the stock falling that sharply over the next month and a half seem really low. This bearish bet appears to be a cheap way for someone to get short the equity, with a minimal capital outlay. Technicals Point To Lower Prices From a technical standpoint, a decline below $210 doesn't seem likely, but a drop to around $245 does seem possible. That would take the stock back to its pre-pandemic highs. The equity recently fell below support at $285, and that price point has become a level of resistance. Given the sharp run higher in the stock starting in March 2021, Home Depot doesn't have much support until that $245 area on the technical chart.
The Odds Are Stacked Against Home Depot
Home Depot experienced major tailwinds from the pandemic. Now that the pandemic is fading, the tailwinds are leaving too. Uncertainties regarding future disposable income and a higher savings rate could cause a lower demand for Home Depot's products. The housing market is facing some issues and could cause Home Depot to sell less home renovation supplies.
Adjustments To Home Depot's Compensation Targets May Suggest An Expected Slowdown
HD's 2022 proxy shows some notable changes around executive compensation targets. In 2021, the Board reduced the 3-year average operating profit target below the 1-year, implying an expectation of near-term profit contraction. This story has yet to play out. The board also reduced management's 3-year avg. ROIC target from 44.5% to 34%, company performance not seen since 2017. In late May '22, HD disclosed changes to their Management Incentive Plan that suggest increased levels of uncertainty around predicting company performance. The MIP changes give the comp. committee more time to set performance targets and may even allow them to lower targets if the business worsens unexpectedly.
Shareholder Returns
| HD | US Specialty Retail | US Market | |
|---|---|---|---|
| 7D | 2.9% | 3.9% | 1.0% |
| 1Y | -6.1% | -30.9% | -12.9% |
Return vs Industry: HD exceeded the US Specialty Retail industry which returned -30.9% over the past year.
Return vs Market: HD exceeded the US Market which returned -12.9% over the past year.
Price Volatility
| HD volatility | |
|---|---|
| HD Average Weekly Movement | 3.9% |
| Specialty Retail Industry Average Movement | 8.8% |
| Market Average Movement | 7.9% |
| 10% most volatile stocks in US Market | 17.1% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: HD is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.
Volatility Over Time: HD's weekly volatility (4%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1978 | 490,600 | Ted Decker | https://www.homedepot.com |
The Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products The company also offers installation services for flooring, cabinets and cabinet makeovers, countertops, furnaces and central air systems, and windows. In addition, it provides tool and equipment rental services.
Home Depot Fundamentals Summary
| HD fundamental statistics | |
|---|---|
| Market Cap | US$318.29b |
| Earnings (TTM) | US$16.52b |
| Revenue (TTM) | US$152.57b |
19.3x
P/E Ratio2.1x
P/S RatioIs HD overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| HD income statement (TTM) | |
|---|---|
| Revenue | US$152.57b |
| Cost of Revenue | US$101.33b |
| Gross Profit | US$51.24b |
| Other Expenses | US$34.72b |
| Earnings | US$16.52b |
Last Reported Earnings
May 01, 2022
Next Earnings Date
Aug 16, 2022
| Earnings per share (EPS) | 16.07 |
| Gross Margin | 33.58% |
| Net Profit Margin | 10.83% |
| Debt/Equity Ratio | -2,279.4% |
How did HD perform over the long term?
See historical performance and comparisonDividends
2.5%
Current Dividend Yield45%
Payout RatioValuation
Is HD undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
3/6Valuation Score 3/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for HD?
Other financial metrics that can be useful for relative valuation.
| What is HD's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$318.29b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 2.4x |
| Enterprise Value/EBITDA | 13.8x |
| PEG Ratio | 4.5x |
Price to Earnings Ratio vs Peers
How does HD's PE Ratio compare to its peers?
| HD PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 50.2x | ||
FND Floor & Decor Holdings | 35.5x | 20.4% | US$9.9b |
AMZN Amazon.com | 123.6x | 52.8% | US$1.4t |
WMT Walmart | 26.7x | 10.5% | US$347.0b |
LOW Lowe's Companies | 15.1x | 4.3% | US$127.2b |
HD Home Depot | 19.3x | 4.3% | US$318.3b |
Price-To-Earnings vs Peers: HD is good value based on its Price-To-Earnings Ratio (19.3x) compared to the peer average (50.2x).
Price to Earnings Ratio vs Industry
How does HD's PE Ratio compare vs other companies in the US Specialty Retail Industry?
Price-To-Earnings vs Industry: HD is expensive based on its Price-To-Earnings Ratio (19.3x) compared to the US Specialty Retail industry average (6.4x)
Price to Earnings Ratio vs Fair Ratio
What is HD's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 19.3x |
| Fair PE Ratio | 21.3x |
Price-To-Earnings vs Fair Ratio: HD is good value based on its Price-To-Earnings Ratio (19.3x) compared to the estimated Fair Price-To-Earnings Ratio (21.3x).
Share Price vs Fair Value
What is the Fair Price of HD when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: HD ($309.69) is trading below our estimate of fair value ($383.8)
Significantly Below Fair Value: HD is trading below fair value, but not by a significant amount.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is less than 20% higher than the current share price.
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Future Growth
How is Home Depot forecast to perform in the next 1 to 3 years based on estimates from 28 analysts?
Future Growth Score
2/6Future Growth Score 2/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
4.3%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: HD's forecast earnings growth (4.3% per year) is above the savings rate (1.9%).
Earnings vs Market: HD's earnings (4.3% per year) are forecast to grow slower than the US market (12.9% per year).
High Growth Earnings: HD's earnings are forecast to grow, but not significantly.
Revenue vs Market: HD's revenue (3.2% per year) is forecast to grow slower than the US market (7.9% per year).
High Growth Revenue: HD's revenue (3.2% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: HD's Return on Equity is forecast to be very high in 3 years time (184.8%).
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Past Performance
How has Home Depot performed over the past 5 years?
Past Performance Score
3/6Past Performance Score 3/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
14.1%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: HD has high quality earnings.
Growing Profit Margin: HD's current net profit margins (10.8%) are higher than last year (10.4%).
Past Earnings Growth Analysis
Earnings Trend: HD's earnings have grown by 14.1% per year over the past 5 years.
Accelerating Growth: HD's earnings growth over the past year (12%) is below its 5-year average (14.1% per year).
Earnings vs Industry: HD earnings growth over the past year (12%) underperformed the Specialty Retail industry 30.3%.
Return on Equity
High ROE: HD's liabilities exceed its assets, so it is difficult to calculate its Return on Equity.
Discover strong past performing companies
Financial Health
How is Home Depot's financial position?
Financial Health Score
2/6Financial Health Score 2/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: HD has negative shareholder equity, which is a more serious situation than short term assets not covering short term liabilities.
Long Term Liabilities: HD has negative shareholder equity, which is a more serious situation than short term assets not covering long term liabilities.
Debt to Equity History and Analysis
Debt Level: HD has negative shareholder equity, which is a more serious situation than a high debt level.
Reducing Debt: HD's has negative shareholder equity, so we do not need to check if its debt has reduced over time.
Debt Coverage: HD's debt is well covered by operating cash flow (36.1%).
Interest Coverage: HD's interest payments on its debt are well covered by EBIT (17.5x coverage).
Balance Sheet
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Dividend
What is Home Depot current dividend yield, its reliability and sustainability?
Dividend Score
5/6Dividend Score 5/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
2.45%
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: HD's dividend (2.45%) is higher than the bottom 25% of dividend payers in the US market (1.52%).
High Dividend: HD's dividend (2.45%) is low compared to the top 25% of dividend payers in the US market (4.09%).
Stability and Growth of Payments
Stable Dividend: HD's dividends per share have been stable in the past 10 years.
Growing Dividend: HD's dividend payments have increased over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonably low payout ratio (44.9%), HD's dividend payments are well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its reasonable cash payout ratio (69.1%), HD's dividend payments are covered by cash flows.
Discover strong dividend paying companies
Management
How experienced are the management team and are they aligned to shareholders interests?
2.5yrs
Average management tenure
CEO
Ted Decker (59 yo)
1.83yrs
Tenure
US$8,154,153
Compensation
Mr. Edward P. Decker, also known as Ted, has been the President of The Home Depot, Inc. since October 5, 2020, and served as its Chief Operating Officer since October 2020 until February 2022 and has been...
CEO Compensation Analysis
Compensation vs Market: Ted's total compensation ($USD8.15M) is below average for companies of similar size in the US market ($USD12.96M).
Compensation vs Earnings: Ted's compensation has increased by more than 20% in the past year.
Leadership Team
Experienced Management: HD's management team is considered experienced (2.5 years average tenure).
Board Members
Experienced Board: HD's board of directors are considered experienced (7.5 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: HD insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
Company Information
The Home Depot, Inc.'s employee growth, exchange listings and data sources
Key Information
- Name: The Home Depot, Inc.
- Ticker: HD
- Exchange: NYSE
- Founded: 1978
- Industry: Home Improvement Retail
- Sector: Retail
- Implied Market Cap: US$318.285b
- Shares outstanding: 1.03b
- Website: https://www.homedepot.com
Number of Employees
Location
- The Home Depot, Inc.
- 2455 Paces Ferry Road
- Atlanta
- Georgia
- 30339
- United States
Listings
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/08/07 00:00 |
| End of Day Share Price | 2022/08/05 00:00 |
| Earnings | 2022/05/01 |
| Annual Earnings | 2022/01/30 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.