The Home Depot Inc. (HD) Shares: Cheap or Risky?

The Home Depot Inc. (NYSE:HD) saw an upside of 0.79% to close Monday at $336.97 after adding $2.63 on the day. The 5-day average trading volume is 2,606,480 shares of the company’s common stock. It has gained $340.86 in the past week. An average of 3,105,405 shares of the company has been traded in the last 20 days, and the 50-day average volume stands at 3,072,884.

HD’s 1-month performance is 1.51% or $5.02 on its low of $324.16 reached on 10/04/21. The company’s shares have touched a 52-week low of $246.59 and high of $345.69, with the stock’s rally to the 52-week high happening on 05/10/21. YTD, HD has achieved 26.86% or $71.35. However, the current price is down -2.52%% from the 52-week high price.

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Insider Transactions

On Aug 23, 50 days have gone by since the last insider trading activity for The Home Depot Inc. (HD). Roseborough Teresa Wynn (EVP, Gen. Counsel & Corp. Sec.) most recently sold 5,000 shares at $328.65 per share on Aug 23. This transaction cost the insider $1,643,250. Chairman & CEO, Menear Craig A, sold 68,468 shares at a price of $325.46 on Aug 20. Then, on Aug 18, EVP – Outside Sales & Service Padilla Hector A sold 1,154 shares at a price of $325.62 per share. This transaction amounted to $375,765.

Valuation Metrics

The company’s PE ratio for the last five years has touched a high of 28.78 and a low of 14.84. HD stock has a beta of 0.98. Moving on to other valuation ratios, the trailing price-to-sales (P/S) ratio is 2.49 while the price-to-book (PB) in the most recent quarter is 171.92, with the price to cash flow ratio at 75.89.

The Home Depot Inc. pays an annual dividend of $6.60 per share. Its dividend yield is 1.96% and the payout ratio is 44.10%. HD’s most recent quarterly dividend payment was made on Sep. 16, when it paid $1.65 a share compared with prior rate of $1.65, down 0.0% from last year’s. The company has boosted its dividend for the last 9 consecutive years with the latest dividend increase of $0.15 reported on Tuesday February 23 2021. Measured over the last 3 years, the Dividend has been growing by 68.54% yearly.

It is projected that The Home Depot Inc.’s next ex-dividend date will be on 6-Dec. HD is expected to distribute $1.65 as its next dividend.

The Home Depot Inc.’s quick ratio for the period ended July 30 was 0.40, with the current ratio over the same period at 1.10 meaning that HD stock is not able to fulfill its debt obligations. As well, the company’s long term debt to equity for the quarter ending July 30 was 16.31, while the total debt to equity was 17.48. In terms of profitability, the gross margin trailing 12 months is 33.70%. The trailing 12-month EBITDA margin is 15.74% while for the period ending July 30; The Home Depot Inc.’s operating margin was 14.80%. The firm’s gross profit as reported stood at $44.85 billion against revenue of $132.11 billion.

Earnings Surprise

For the quarterly period ending July 30 this year, Net income and sales went up compared to those figures reported in the previous quarter. Net income grew 7.45% to $41.12 billion, while revenue of $37.5 billion was 8.8% off the previous quarter. Analysts expected HD to announce $4.44 per share in earnings in its latest quarter, but it posted $4.53, representing a 2.00% surprise. EBITDA for the quarter stood at more than $7.35 billion. HD stock balance sheet for the quarter ending July 30 shows that total liabilities totaled 68.7 billion, with total debt at $42.35 billion. Shareholders hold equity totaling $1.06 billion

Technical Picture

Let’s look briefly at The Home Depot Inc. (HD) price momentum from a technical analysis perspective. The 9-day relative strength index as at close on 11 October was 57.04% to suggest the stock is trending Neutral, with historical volatility in this time period at 21.03%.

The stock’s 5-day moving average is $333.73, reflecting a +3.22% or $10.50 change from its current price. HD is currently trading +0.45% above its 20-day SMA, +7.16% above its 100-day SMA. However, the stock’s current price level is away from the SMA50 and SMA200 by +2.68% and +24.89% respectively.

Stochastic %K and %D was 61.81% and 51.55% and the average true range (ATR) pointed at 6.49. The RSI (14) points at 55.50%, while the 14-day stochastic is at 65.42% with the period’s ATR at 6.21. The stock’s 9-day MACD Oscillator is pointing at 4.02 and 2.36 on the 14-day charts.

Analyst Ratings

In the most recent analyst report for The Home Depot Inc. (NYSE: HD), Loop Capital downgraded it to a Hold rating. They previously had a Buy rating on the stock. Analysts offering their rating for HD stock have a consensus rating for the stock as Overweight. Currently, 1 brokerage advisors rate HD as a “sell,”, while 11 advise that investors “Hold.” 0 analysts have rated the stock as underweight. 5 rates the stock as overweight while 17 have offered a “buy” rating.

What is HD’s price target for the next 12 months?

Analysts have a consensus price target ranging from a low of $310.00 and a high of $411.00, with their median price target at $350.00. Looking at these predictions, the average price target given by analysts is for The Home Depot Inc. (HD) stock is $351.45.


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