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Company: Home Depot |
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Sector: Consumer Cyclical (NYSE:HD)
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Strengths:
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Home Depot has a wide economic moat. Its economies of scale is unmatched in the industry providing it most favorable terms with suppliers and distributors.
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90% of stores are owned, not leased, offering it great flexibility with renovations... etc.
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Expanding growth into new markets including China, Mexico, and Canada.
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HD has recently sold off satellite businesses (Expo Design Center, Yardbirds, HD Bath Chains) to refocus on its core business model.
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According to Morningstar, Lowes and Home Depot account for roughly 20% of the home improvement market offering prospects of future growth.
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Improving customer service by adding full time staff and recruiting skilled trade specialists to improve customer service.
Weaknesses:
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Highly dependent on housing market... no surprise.
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Sales and growth will depend on housing market moving forward.
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The U.S. home improvement market is showing signs of saturation, future growth depends on how well overseas markets embrace HD.
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Lowes has surpassed HD in store environment and customer service in recent years, it is important HD catch up and cover lost ground.
Key Financials:
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Dividend 3.3%
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HD P/E 18.20 S&P 17.40 Industry 24.40
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Gross Margin 33.65%
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Operating Margin 6.11%
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Total Current Assets $16,314 Mil.
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Total Current Liabilities $13,548 Mil.
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Cash/Short Term Investments: $2,220 Mil.
Recommendation: HOLD
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Page last modified March 11, 2012
