If you are living in the United States, Canada, Mexico, Puerto Rico, or the Virgin Islands and need construction materials, Home Depot is where you head to get them.
If you intend to add stocks of a company engaged in the sale of construction materials or tools to your portfolio, the first company you should check out is Home Depot. What’s more, this is a stable and reliable issuer of the blue-chip stocks.
With 2,144 stores of an average area of 105,000 square meters, Home Depot is considered to be the largest retail chain on the planet in its sector. The biggest 225,000 sq.m store is in New Jersey, and there is still a room for growth.
The famous brands include the Ryobi tool, RIDGID, LG devices, Toro, Cub Cadet lawn tractors and mowers. This is the number one brand in the United States accounting for 25% market share. It is basically an inexhaustible business, as people will continue to build something, hammer, repair, mow, break, and return to buy again.
Its major shareholders are:
With 2.56%, the dividend payout rate is slightly higher than the market average. The number of employees is 415,700. So, there is every reason to consider this company too cool to fail. Return on capital amounting to 21.70% is pretty impressive, too. From 2016 to 2020, the revenues increased from $88 billion to $110 billion, while the net profit went up from $7 billion to $11 billion. The company not only maintains a tight grip on its niche but also continues to grow.
Perhaps, the appetites and desire to expand the area of operation into new countries and regions will awake, especially given the fact that quarantine will drag many businesses down. 2019 EPS was $9.73.
Now, let's take a closer look at the latest reports in order to get a more objective view of the unfolding situation. What we see here is a stable figure of $2.2 per share. The May report is expected to demonstrate $2.27. I wouldn’t recommend making any rushed decisions here though, especially after the V-shaped share buyback. However, even if the report heads south, the Home Depot’s return to its normal operation may offer the prospect of about $ 8.8 per annum which is 25 P/E. It’s not the best figure; however, when the price went up to 160, the company was offering a fair value.
From both a fundamental and technical standpoint, the false breakout of 158 was that perfect moment. Everything that was already above it was supported by the index ahead of the stock. After that, the instrument got stuck at 210 for a while. However, the momentum that followed triggered it and the share went to its historic highs. Currently, the share remains stronger than the market. The buyers are standing their ground; however, the upcoming report on May 19 may somewhat dampen the enthusiasm, judging from the overbought P/E.
Even if the company manages to achieve $3 per quarter and $12 per annum, the fair price will still remain around 180. Nevertheless, from a fundamental standpoint and given the global pandemic, this is an extremely ambitious goal to achieve even within the next two years. Can we still expect growth in the coming years, though? Sure, we can. However, since one of the investor’s top priorities is risk assessment, you should keep in mind that the risks at highs are quite significant.
Аutor: Viktor Makeeu