Last week Home Depot (HD - Get Report) stunned investors by reporting a very strong quarter. That confirmed to many that Home Depot is one of the best stories in retail.

Back in December, Home Depot held an analyst day that reinforced Home Depot's strength. Chief Financial Officer Carol Tome outlined how the company plans to get to $101 billion in revenue by 2018.

Tome believes Home Depot can grow its revenue from $88.519 billion in fiscal 2016 to $101 billion by fiscal 2018 by increasing operating margin from the current 13.2% to 14.5% and by adding another $13 billion in sales. To do that, Home Deport plans to add an additional five to seven new stores per year, which would push sales up approximately 4.7% a year. In 2016, sales rose 6.4% to $88.5 billion. The consensus estimate is looking for sales growth of 5.9% for next year and 4.3% the year after.

Improving efficiencies and adding stores is not enough to get Home Depot to its goal. The company will have to improve inventory turns from 4.8x to 5.7x, which will require a $1.8 billion investment in new technology and over $300 million in supply chain improvements.

The investments in technology are really beginning to pay off. For example, last week, when HD reported fourth-quarter sales, e-commerce sales rose 23% and buy-online pickup represented 40% of transactions. Total sales rose 9.5% to $21 billion. Total customer transactions increased 5.1%, while average ticket was up 2%.

Same-store sales rose 7.1%. The best-performing categories were appliances, tools and building materials. Even more impressive, Home Depot drove those results in an environment where pressure-treated wood, windows, exterior doors, dimensional lumber, and gypsum are still below the record sales levels set in 2006.

Wall Street has left plenty of room to hike estimates if the company can hit its $101 billion target. Right now, the consensus for fiscal 2017 is looking for revenue of $93.8 billion, up 5.9%, and for Home Depot to earn $6.14 share. Likewise, the Street is at $97.8 billion in revenue for fiscal 2018.

If you think Home Depot can trade to the upper end of its historical multiple (16x to 22x), it is pretty easy to see that Home Depot stock could at least get back to its 52-week high of $135.


This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.