NEW YORK (TheStreet) -- The S&P/Case-Shiller index of 20 metropolitan areas, which measures U.S. single-family home prices, climbed 0.8% in January on a seasonally-adjusted basis. TheStreet's Jim Cramer says this was neither too hot nor too weak.
Cramer notes this is important because of what Home Depot (HD) said earlier this year: as house prices continue to rise, people will spend more on their homes, which will improve retail, which is a major factor in the economy. Cramer says the Case-Shiller number was "nothing special, but nothing hurtful."
Analysts had expected an increase of 0.7% for January.
"We rate HOME DEPOT INC (HD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity, good cash flow from operations, increase in stock price during the past year and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HOME DEPOT INC has improved earnings per share by 7.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HOME DEPOT INC increased its bottom line by earning $3.75 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($4.43 versus $3.75).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, HOME DEPOT INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $1,647.00 million or 3.51% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -18.94%.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: HD Ratings Report
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts