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Time to Buy Home Depot (HD) Stock at New High?

Benjamin Rains
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Time to Buy Home Depot (HD) Stock at New High?

Shares of Home Depot (HD) surged over 2.5% in morning trading Monday to hit a new 52-week and all-time high. The question for investors is should they consider buying Home Depot stock at the moment?

Shares of Home Depot HD surged over 2.5% in morning trading Monday to hit a new 52-week and all-time high. The question for investors is should they consider buying Home Depot stock at the moment?

Overview

With no recent news to speak of, Home Depot appears to still be riding a wave of positive momentum following its strong second quarter financial results. The firm posted adjusted quarterly earnings of $3.05 per share, which beat the Zacks Consensus Estimate of $2.84 per share and marked a roughly 36% jump from the year-ago period.

One of the world’s largest home improvement firms also saw its revenues pop by 8.4% to hit $30.46 billion. This grow was impressive for a company of its size and age. "We were very pleased with our record second quarter sales and earnings,” CEO Craig Menear said in a company statement. “Not only did our seasonal business rebound from the first quarter, but our overall results exceeded our expectations."

More importantly, the Atlanta-based retailer saw its same-store sales surge 8%, which topped Wall Street estimates and helped Home Depot stand out from some of its retail peers. Walmart’s WMT U.S. same-store sales popped 4.5% last quarter, which marked its highest domestic same-store sales growth in more than 10 years. At 6.5%, Target TGT posted its best quarterly comparable sales performance since 2005.

Price Movement 

Home Depot has seen its stock price climb 63% over the last two years, which outpaces the S&P 500’s roughly 33%. HD shares have performed well over the last 52 weeks as well, up over 32% compared to the S&P’s 16%.

 

Valuation

Moving on, HD is currently trading at 20.7X forward 12-month Zacks Consensus EPS estimates, which marks a significant discount compared to its industry’s 28X. Home Depot is trading just slightly above its rival Lowe's LOW 19.3X.

Over the last year, HD has traded as high as 23.7X and as low as 18X. Home Depot is also currently trading almost directly in line with its one-year median and not too far above its five-year median of 19.9X. Therefore, HD’s valuation is hardly stretched at the moment.

 

Outlook

Looking ahead, our current Zacks Consensus Estimate is calling for Home Depot’s third-quarter revenues to jump by 4.9% to hit $26.26 billion. HD’s full-year revenues are projected to surge by 7.3% to reach $108.26 billion.

At the other end of the income statement, Home Depot’s adjusted quarterly earnings are projected to surge 23.9% to $2.28 per share. Meanwhile, the home improvement retailer’s adjusted fiscal 2018 earnings are expected to climb by nearly 28.3% to $9.57 per share.

Investors should also note that Home Depot has earned nine downward earnings estimate revisions within the last 30 days, against just one positive change. In contrast, HD has received 14 full-year revisions during this same time period, with 100% agreement to the upside.

Home Depot is currently a Zacks Rank #3 (Hold) based on its revision trends and sports an “A” grade for Growth in our Style Scores system. With that all said, it might still be best to keep an eye on Home Depot stock and wait for it to come down from its new high as its fundamentals appear solid.

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The Home Depot, Inc. (HD) : Free Stock Analysis Report
 
Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
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