Buying The Home Depot stock ($HD)

Investment idea by DTI

Exchange: NYSE
IndustryHome Improvement Stores


Entry strategy

Price: market price
Stop-loss: $171,5
Take profit: first target $207.5, then $233.5
Investment horizon: 6–9 months

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Company info

The Home Depot, Inc. is the world's biggest home improvement supplies retailer. Among other items, the company sells construction materials, products for lawn and garden, and decorations. The Home Depot also offers cleaning services and tools and machinery rentals. Founded in 1978, The Home Deport is headquartered in Atlanta, Georgia.

The company's management is actively working on executing its 3 year investment strategy. Throughout 2018, $HD plans to hire over 1000 employees in its technological departments in Atlanta, Austin and Dallas. In total, growth investments will amount to $11.1 billion in 2018-2020.

According to the plan, the management is working towards a technological breakthrough on various levels, including offline and online client services, logistics and staff productivity. The Home Depot, implementing machine learning, cloud computing and visual authentication solutions, is included in Fast Company — a list of 50 innovative companies.

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Technical analysis (trading plan)

Pic. 1. Investment strategy for The Home Depot, Inc. ($HD). Source: TradingView.

$HD price supposedly finished forming a falling wedge — a mid-term downtrend reversal figure. Buyers showed strength around 200 MA and the price closed above $175–177 per share. We expect a new wave of longs in the main uptrend with the first target at $207, and further at $233.5 per share.

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Financial performance

The company is showing stable annual growth in revenues and profits (see Table 1). Net profit and revenue in the last quarter of 2017 were higher than in the last quarter of 2016. (see Table 2). In the last reporting seasons The Home Depot's performance surpassed the industry and sector averages. (see Table 3)

The company is expected to report on the Q1 2018 on the 15th of May.

Table 1. The Home Depot, Inc. ($HD) annual performance. Source: MarketWatch.
Table 2. The Home Depot, Inc. ($HD) quarterly performance. Source: MarketWatch.
Table 3. The Home Depot, Inc. ($HD) growth rates. Source: Reuters.

At the moment $HD stock is comparatively undervalued (see Table 4). Besides potential growth in capitalization, investors can also cash in on the higher-than-industry dividends (see Table 5).

Table 4. The Home Depot, Inc. ($HD) valuation ratios. Source: Reuters.
Home Depot dividends
Table 5. The Home Depot, Inc. ($HD) dividends. Source: Reuters.

Also published on Medium.