"We are encouraged by the improvements and advantages in Home Depot's infrastructure and product offering that enable it to lead the industry in serving its customers," analysts said about the Atlanta, GA-based home improvement retailer.
"Our caution, while moderate, comes from frequent crossshopping in the industry, which creates competitive pressures, difficulty improving already efficient operations at peak margins of 12.5%, and lack of visibility into home price appreciation continuing at its recent pace," analysts noted.
"Following a 27% return in the stock over the last year and a about 155% return in the last three years (vs. 9% and 93% for the S&P Retailing index), we expect moderate multiple expansion from current levels," analysts added.
Separately, TheStreet Ratings team rates HOME DEPOT INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"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 solid stock price performance, impressive record of earnings per share growth, revenue growth, notable return on equity and expanding profit margins. 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:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.92% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- HOME DEPOT INC has improved earnings per share by 21.1% 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 ($4.48 versus $3.75).
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 5.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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.
- 35.02% is the gross profit margin for HOME DEPOT INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 7.49% is above that of the industry average.
- You can view the full analysis from the report here: HD Ratings Report