I believe the runup of this stock is based on the belief that it should be grouped with the price action of the home builders, as their shares are rebounding sharply on early news of a housing rebound. But when you look at the monthly charts for the home builders, they are up sharply, but are nowhere near their pre crisis highs;while HD has more than recovered and is pretty extended. The PE does not reflect the fact that it is really more of a cyclical stock, with its growth stage behind it. Sales are only expected to grow low single digits. The double digit growth in EPS in the last quarter and over the next few quarters is due to good expense reductions during the downturn and financial engineering (stock buybacks); but these considerations will be fully considered into comparisons over the next few quarters. What will be left is revenue growth in the single digits- hardly a cause for the current extended PE multiple. The same is true for LOW.
While I was long all through the downturn and recovery of this stock, I think it is now a "compelling short" not my words, but from a market analyst last week on CNBC. Before you jump all over this post, please just look at longer term monthly charts for HD versus some of the home builders like PHM .