Seidman Investment Portfolio Organization

 

Company: Home Depot
 
Sector: Consumer Cyclical (NYSE:HD)

Strengths: 

  •  
  • 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. 
  • 90% of stores are owned, not leased, offering it great flexibility with renovations... etc. 
  • Expanding growth into new markets including China, Mexico, and Canada.
  • HD has recently sold off satellite businesses (Expo Design Center, Yardbirds, HD Bath Chains) to refocus on its core business model.  
  • According to Morningstar, Lowes and Home Depot account for roughly 20% of the home improvement market offering prospects of future growth. 
  • Improving customer service by adding full time staff and recruiting skilled trade specialists to improve customer service.

Weaknesses:

  • Highly dependent on housing market... no surprise.
  • Sales and growth will depend on housing market moving forward. 
  • The U.S. home improvement market is showing signs of saturation, future growth depends on how well overseas markets embrace HD. 
  • 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:

  • Dividend 3.3%
  • HD P/E 18.20  S&P 17.40  Industry 24.40
  • Gross Margin 33.65%
  • Operating Margin 6.11%
  • Total Current Assets $16,314 Mil. 
  • Total Current Liabilities $13,548 Mil.
  • Cash/Short Term Investments: $2,220 Mil. 

Recommendation: HOLD

 

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Page last modified March 11, 2012