Home Depot's gross profit margin for the second quarter of its fiscal year 2012 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry. Home Depot has very weak liquidity. Currently, the Quick Ratio is 0.38 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year.
During the same period, stockholders' equity ("net worth") has remained virtually unchanged only decreasing by 3.28% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future.
Home Depot's P/E ratio indicates a premium compared to an average of 20.53 for the Specialty Retail industry and a premium compared to the S&P 500 average of 16.49. For additional comparison, its price-to-book ratio of 4.98 indicates a significant premium versus the S&P 500 average of 2.28 and a discount versus the industry average of 4.99. The price-to-sales ratio is below both the S&P 500 average and the industry average, indicating a discount. The valuation analysis reveals that, Home Depot appears to be valued on par with the investment alternatives within the industry.