Sorry for my typo's yesterday - iphone. I meant to say " I don't think you understand the mechanics of the P/E ratio by your statement. Analysts are pointing out that current valuations (PE) on HD is overvalued when compared to 2007 levels when housing peaked. PE was cheaper in 2007 than today and that makes no sense. Housing has just begun to make some positive signs. In other words, HD is currently way ahead of its earnings potential. In 2007 the stock made sense trading at higher PE levels. Today we are still teetering along the bottom with much uncertainty.
I don't you understand by your reply. PE valuations are currently out of whack which means the stock is overvalued on current earnings. Back in 2007 we experienced the greatest housing bubble in history so back then EPS would have been mich higher and PE would have been lower based on what the analysts are currently saying. That means by default that the current PE of HD is too high based on it's share price being too high, earnings being too low or both. Shares are overvalued no matter how you slice it and was too high in 2007 im sure as well.