top of page

Is Home Depot a buy?

It’s time to breakdown a popular home improvement name. Here is the breakdown on $HD, otherwise known as Home Depot.

Current Price: $305.25

52/Wk High: $308.02

52/Wk Low: $174.00/share

Market Cap: $328.8 Billion

Dividend: $1.65 / 2.17% Yield

Read below for the breakdown!

Home Depot ($HD) is a major home improvement company founded in 1978 in which has now grown to be a leader in the home improvement space with over 2,296 stores.

Taking a look at Home Depot’s locations the company maintains locations in the United States, Canada, Mexico, Puerto Rico, and the territories of the US Virgin Islands.

On a recent note, Home Depot once again raised its dividend by 10% to $1.65/share, another solid increase that takes the company’s yearly dividend to $6.60/share.

In recent weeks Home Depot has rallied to all-time highs, moving 15.08% to the upside in just three months, leaving investors wondering if Home Depot is a buy.

Digging into the numbers Home Depot beat Q4 2020 expectations with an EPS of $2.65, better than the analyst’s EPS consensus estimate of $2.62. On a year-over-year basis, EPS improved 16.23%.

On the sales front, Home Depot reported $32.3 billion in sales for the quarter, representing 25.1% growth year over year. For comparison, sales increased by $6.5 billion.

As for profit, Home Depot delivered a solid gross profit of $10.831 billion, representing a 24% jump in gross profit year over year. On a final gross profit note, the Q4 2019 gross profit level was $8.736 billion.

Income improved as well, jumping 20% throughout the fourth quarter of 2020 to a strong $4.083 billion versus the Q4 2019 operating income level of $3.403 billion.

Expenses also increased, which is to be expected. Operating expenses jumped 26.5% throughout Q4, landing at $6.748 billion for the quarter.

Taking a look at the full year, net sales totaled $132.110 billion, representing a 19.9% jump in sales throughout FY 2020. For comparison, net sales for FY 2019 totaled $110.225 billion.

Rounding out the numbers, Home Depot’s FY 2020 operating income jumped 15.4% to a strong $18.278 billion.

Leadership was upbeat about the quarter.

“The team demonstrated ongoing flexibility to operate effectively in a very challenging environment and deliver record-breaking sales and earning,” CEO Craig Menear said.

Shifting into the balance sheet the numbers were solid.

Total Debt: $37.238 Billion

Total Liabilities: $67.282 Billion

Total Assets: $70.581 Billion

Cash & Short Term Inv: $7.895 Billion

On a valuation basis, Home Depot does trade at a premium.

Price to Earnings: 25.31x

Forward Price to Earnings: 22.20x

Price to Sales: 2.43x

Price to Book: 99.43x

Price to Cash Flow: 23.03x

Management has been very effective.

Return on Equity: 14,061.20%

Return on Assets: 21.12%

Return on Invested Capital: 32.05%

Given the numbers, the analysts are bullish with a mean price target of $314.73/share, representing a 3.11% gain.

The high price target is $330.00/share, representing an 8.11% upside while the low price target is $288.00/share, representing a -5.65% downside.

The big money is also quite involved with 68.35% of Home Depot being owned by institutions. Top holders include The Vanguard Group, State Street Global Advisors, and BlackRock Institutional Trust.

On a technical basis, Home Depot is bullish. According to the six-month charts, the MACD is moving to the upside with significant momentum with a range of 9.25 down to 6.36.

The charts are also indicating an RSI of 75.76 and CCI of 118.35, both of which are on the high end.

In short, Home Depot continues to be a strong long-term investment with expanding revenues, a stellar management team, and a dividend that pays you to stay.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

bottom of page