HD - Embedded Expectations Analysis - 2022 06 02
Home Depot (HD) currently trades near corporate and historical averages relative to Uniform earnings, with a 20.3x Uniform P/E (Fwd. V/E').At these levels, markets are pricing in expectations for Uniform ROA to fade to 30%, accompanied by 3% Uniform asset growth going forward.
Similarly, analysts expect Uniform ROA to remain at 32% levels through 2024, accompanied by 1% Uniform asset shrinkage.
If sustained going forward, these levels would imply a stock price closer to $281, representing approximately a 9% equity downside for the firm.
Moreover, the firm's most recent earnings call suggests management may have concerns about growth, profitability, and macro headwinds.
The Home Depot is a home improvement retailer. The company provides its customers an assortment of building materials, home improvement products, lawn and garden products, and decor products and provides a number of services, including home improvement installation services and tool and equipment rental. The company also maintains a network of distribution and fulfillment centers, as well as a number of e-commerce websites. The company provides a number of programs for its Professional Customers to meet their particular needs, and for its Do-It-Yourself and Do-It-For-Me customers, the company provides a number of installation services. The company also provides tool and equipment rentals for its customers.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
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