Home Depot (NYSE: NYSE:HD) is a large cap company that operates within the specialty retail industry. Its market cap is $189 billion today and the total one-year return is 19.51% for shareholders.
Home Depot stock is beating the market, and it reports earnings next week. Does that make it a good buy today? To answer this question we've turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
Earnings-per-Share (EPS) Growth: Home Depot reported a recent EPS growth rate of 23.93%. That's below the specialty retail industry average of 191.34%. That's not a good sign. We like to see companies that have higher earnings growth.
Price-to-Earnings (P/E): The average price-to-earnings ratio of the specialty retail industry is 28.85. And Home Depot's ratio comes in at 24.25. It's trading at a better value than many of its competitors.
Debt-to-Equity : The debt-to-equity ratio for Home Depot stock is 544.68. That's above the specialty retail industry average of 89.34. That's not a good sign. Home Depot's debt levels should be lower.
Free Cash Flow per Share Growth : Home Depot's FCF has been lower than its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
Profit Margins : The profit margin of Home Depot comes in at 7.85% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Home Depot's profit margin is above the specialty retail average of 6.62%. So that's a positive indicator for investors.
Return on Equity
(ROE) gives us a look at the amount of net income returned to shareholders. It tells us how much profit a company produces with the money shareholders invest. This is another metric that is useful in comparison to other companies in the same industry.
Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Home Depot is 149.44%, and that's above its industry average ROE of 24.19%.
Home Depot stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a hold.