HDHD
US • CONSUMER CYCLICAL
$352.68
P/E
25.06
PEG
1.97
FCF Yield
4.2%
Rev Growth YoY
+4.8% YoY
Gross Margin
33.1%
Health Score
7/10
D/E Ratio
4.35
Confidence
MEDIUM
Business Snapshot
Home Depot is the world's largest home improvement retailer, operating approximately 2,300 stores across North America. The company generates revenue primarily through sales of building materials, lumber, flooring, paint, tools, appliances, and garden products to both do-it-yourself (DIY) customers and professional contractors. As a large-cap company with a market capitalisation of $346.99B and TTM revenue of $166.59B, it holds a dominant competitive position in the fragmented home improvement retail market. The company’s scale, supply chain infrastructure, and brand recognition create a significant competitive moat in a cyclical sector tied to housing and renovation activity.
Financial Health
Home Depot maintains a gross margin of 33.1% and a net margin of 8.4%, reflecting a steady, if not expanding, profitability structure compared to prior periods. The balance sheet shows signs of leverage with a debt/equity ratio of 4.35x, which is elevated and limits financial flexibility, though the current ratio of 1.06x indicates adequate short-term liquidity to cover near-term obligations...
Risk Assessment
- DEBT — Debt/equity of 4.35x indicates significant financial leverage, reducing financial flexibility in a downturn.
- EARNINGS QUALITY — Only 1 of the last 4 quarters beat estimates, suggesting management guidance may be less reliable.
- TECHNICALS — The stock trades below its 200-day MA of $356.77, with a death cross crossover, indicating a medium-term bearish trend.
- 52-WEEK POSITION — The current price of $352.68 is closer to the 52-week low of $286.95 than the high of $418.06, reflecting weak relative price momentum.
- VALUATION DIVERGENCE — The current price of $352.68 represents a significant premium to the Python DCF estimate of $287.45, implying the market may be pricing in overly optimistic long-term assumptions....
Home Depot maintains a gross margin of 33.1% and a net margin of 8.4%, reflecting a steady, if not expanding, profitability structure compared to prior periods. The balance sheet shows signs of leverage with a debt/equity ratio of 4.35x, which is elevated and limits financial flexibility, though the current ratio of 1.06x indicates adequate short-term liquidity to cover near-term obligations. The company generated substantial free cash flow of $14.45B, translating to a healthy FCF yield of 4.2%, reflecting strong cash generation despite the leverage. Overall, Home Depot's financial health is robust enough to support its dividend and reinvestment programmes, though the high debt load warrants monitoring in a rising-rate environment.
- DEBT — Debt/equity of 4.35x indicates significant financial leverage, reducing financial flexibility in a downturn. - EARNINGS QUALITY — Only 1 of the last 4 quarters beat estimates, suggesting management guidance may be less reliable. - TECHNICALS — The stock trades below its 200-day MA of $356.77, with a death cross crossover, indicating a medium-term bearish trend. - 52-WEEK POSITION — The current price of $352.68 is closer to the 52-week low of $286.95 than the high of $418.06, reflecting weak relative price momentum. - VALUATION DIVERGENCE — The current price of $352.68 represents a significant premium to the Python DCF estimate of $287.45, implying the market may be pricing in overly optimistic long-term assumptions.
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