Fundamental Analysis
The Home Depot, Inc, abbreviated as The Home Depot, is one of the world’s largest retailers of housewares, building materials, DIY, gardening and home improvement products. It also provides a range of services including large furniture installations, DIY services, and tool and equipment rentals. As of the end of fiscal 2022, Home Depot operated 2,322 stores located throughout the United States, Canada and Mexico. By its own admission, Home Depot’s business is cyclical, with the surge coming with spring and lasting through the end of summer. It is a clear correlation with the building season.
Home Depot has well-crafted investor reports that, in addition to accounting data, go into lengthy analysis of the company’s business from several angles and address potential problems. A carefully crafted report like this is good news for investors. First, it allows investors to understand in detail Home Depot and the industry in which it operates, and second, it highlights the quality of the company’s management, which is thinking about these problems and preparing possible scenarios and solutions. These details suggest to us that Home Depot’s management is likely competent, experienced, and cares about the company over the long term. The company’s current CEO, Edward Decker, has been with the company for more than 22 years. Incidentally, the company’s stock price has risen from about $60 in the past decade to about $290 today, a decent result for a company that is not in the tech business.
Results
For fiscal year 2022, the company had sales of $157 billion with net income of $17.1 billion. This is a slight increase from 2021 (sales of $151 billion and profit of $16.4 billion).
The PE ratio is at 17 when the industry average is 33. The value is therefore significantly lower.
The company is focusing on paying a regular dividend, having declared a dividend of USD 2.09 per share in the last quarter, as well as repurchasing its own shares.
Technical analysis
Wall Street analysts’ price estimate for this stock is a price between $264-400. The most common price estimate is around $331.
The moving averages are now at a crossing point, most likely the stock will be in an uptrend. The RSI is neutral but not present at the upper boundary of the range. This shows that the stock is not going through extreme volatility.
Supports and resistances are long term and are at prices around $265, $290,330 and $415.
Conclusion
Home Depot is an interesting stock for both short-term speculation and long-term investment. Technical analysis points to a possible trend change. It is spring, and that means strong demand for the company’s products. According to annual reports, the company appears to have competent management and is aware of many potential risks, which it publicly warns investors about. These are all positive signs for the potential and long-term growth of the company’s stock.
Of course, it is important to be mindful of monitoring the stock’s behavior around major resistances. If the stock does not break through them, a downward trend may instead follow.
Sources:
https://seekingalpha.com/symbol/HD
https://en.wikipedia.org/wiki/The_H