Home Depot (HD): Rethinking Valuation After EPS Miss and Softer Earnings Outlook
Home Depot (HD) is under a cloud of lowered earnings expectations right now, after a recent EPS miss and softer housing backdrop pushed analysts to trim forecasts and turn more cautious on the stock.
See our latest analysis for Home Depot.
Despite initiatives like faster delivery and the new Creator portal aimed at driving engagement, the share price has lost momentum recently. A 90 day share price return of negative 17.01 percent and a softer 1 year total shareholder return of negative 9.93 percent highlight how macro housing worries and earnings uncertainty are tempering what had been a solid multi year compounding story.
Given that backdrop, it can be useful to compare Home Depot with other names in the space. Our screener of fast growing stocks with high insider ownership offers a curated set of ideas where internal conviction and growth potential may be more aligned.
With shares trading below average analyst targets but earnings forecasts sliding, is the recent pullback signaling a mispriced blue chip, or simply reflecting a market that has already discounted Home Depot’s next leg of growth?
Most Popular Narrative: 13.4% Undervalued
With Home Depot last closing at $345, the most followed narrative pegs fair value materially higher at about $399, framing the recent drawdown as a potential disconnect between expectations and price.
The company's targeted acquisitions (SRS, pending GMS) and continued expansion of its Pro customer ecosystem are positioning Home Depot as the supplier of choice for complex, higher-ticket projects, which is set to increase market share, customer lifetime value, and organic revenue growth over time.
Curious how steady top line growth, expanding margins and a richer future earnings multiple all intersect to justify that higher value? The full narrative unpacks the specific revenue path, profitability shift and valuation bridge that turn today’s price into a potential multi year rerating story.
Result: Fair Value of $399 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, persistent weakness in big ticket remodeling and rising cost pressures on margins could delay the earnings acceleration that this narrative anticipates.
Find out about the key risks to this Home Depot narrative.
Another Take on Value
Our SWS DCF model paints a very different picture, suggesting fair value closer to $277, which would make Home Depot look overvalued at $345 rather than undervalued. Is the crowd leaning too hard on multiple based optimism and downplaying cash flow risks?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Home Depot for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 913 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Build Your Own Home Depot Narrative
If you see the story differently or would rather test your own assumptions against the numbers, you can build a complete narrative in just a few minutes: Do it your way.
A great starting point for your Home Depot research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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