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Today we're going to take a look at the well-established The Home Depot, Inc. (NYSE:HD). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$431 and falling to the lows of US$382. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Home Depot's current trading price of US$382 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Home Depot’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Home Depot
What Is Home Depot Worth?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 3.3% below our intrinsic value, which means if you buy Home Depot today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $395.33, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Home Depot’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Home Depot?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Home Depot's earnings over the next few years are expected to increase by 22%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in HD’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on HD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.