Stock (Symbol) |
Home Depot (HD) |
Stock Price |
$203 |
Sector |
| Retail & Travel |
Data is as of |
| January 30, 2018 |
Expected to Report |
| Feb 20 |
Company Description |
 The Home Depot, Inc. (The Home Depot) is a home improvement retailer. The Home Depot stores sell an assortment of building materials, home improvement products and lawn and garden products and provide services. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. The Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. As of December 31, 2014, the Company had 2,269 The Home Depot stores, which included 1,977 stores in the United States, including the Commonwealth of Puerto Rico and the territories of the United States Virgin Islands and Guam; 181 stores in Canada, and 111 stores in Mexico. Source: Thomson Financial |
Sharek’s Take |
 Home Depot’s (HD) expected to have a fabulous 2018 due to multiple catalysts. First, the housing market remains very robust, with real estate prices strong. Stable/rising prices are key as it entices homeowners to renovate. Big ticket sales (those above $900) rose 12% last qtr. Second, a wave of natural disasters in 2017 — California wildfires, hurricanes throughout Texas and Florida, and earthquakes in Mexico — will mean rebuilding in 2018. Home Depot is focused helping Pros manage their business. The company just acquired Compact Power Equipment, a leading provider of equipment rental. Another catalyst is online sales, which rose 19% last qtr and 23% 2 qtrs ago, but still account for just 6% of total sales. What makes this stock special is the company does so much with such little store growth. This is a mature chain, which doesn’t really grow its store base much (they went from 2274 to 2278 stores as of year ending January 2017) but management is sound in improving SSS as well as spending its hoards of profits on stock buybacks & dividends. Management pays out more than half of profits to dividends (which have increased every year since 1998) and stock buybacks. In 2016 the company bought back around 4% of shares, and just upped its buyback plan from $5 billion to $7 billion and $8 billion the last 3 years. Home Depot is taking mid single-digit sales growth and getting mid-teens profit growth out of it — with almost all the sales growth coming from same store sales. This stock is safe, reasonably priced, and comes with an Estimated Long-Term Growth Rate of 15% per year in addition to a juicy 2% yield. At 22x earnings the stock is reasonably priced too. The best thing is qtrly profit growth is expected to be 22% in the coming year, and that could provide more fuel for this stock. |
One Year Chart |
 Last qtr HD delivered sales growth of 8% and same store sales growth of 8%. Profits grew 17% and beat the 13% estimate. HD had a big boost in 2018 profit estimates — from $8.31 to $9.02. And qtrly profit Estimates are for 12%, 21%, 22% and 20% growth the next 4 qtrs. Just last qtr all these figures were between 11% and 13%. The Est. LTG just increased from 13% to 15% — awesome! |
Fair Value |
 I’m taking my Fair Value up from a P/E of 23 to a P/E of 25. With all the good news, it’s no wonder this stock has soared from $165 to $203 since last qtr. I still see good upside this year and next. Also, 2018 estimates have grown from $8.14 to $8.19, $8.31 and $9.02 the last 4 qtrs so my price targets could go up in the coming qtrs. Note: this last qtr saw a huge increase, which is unlikely to be duplicated. |
Bottom Line |
 Home Depot has multiple catalysts for growth, most important being a strong economy. HD stock has surged higher since these earnings were released last qtr, thus I feel it will settle down some in the coming months. But with profits set to grow 22% for the next year and a P/E of 22, this safe stock is a very good deal. HD ranks 4th in the Conservative Portfolio Power Rankings and 21st the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
21 of 39Aggressive Growth Portfolio N/AConservative Stock Portfolio 4 of 32 |
