➡️ Although we do outline some of the latest news as of the date of this post, this review on Home Depot will help you determine if this stock is a good buy, sell, or hold. Our goal is to help you understand the company, where the company is going, the competition, and the leadership. Keep in mind, investing is more than just numbers. It’s wise to look past the numbers and look at the business. This review does exactly that.
The Home Depot (Also known as Home Depot) is the world’s largest home improvement retailer with approximately 2,300 stores in the US, Canada, Puerto Rico, and Mexico.
Table of Contents
- Tykr Rating
- Home Depot Company History
- Home Depot Business Model
- Home Depot News
- Home Depot Competition
- Home Depot 4Ms
- Home Depot Financials
- Is Home Depot Stock a Good Buy?
- Summary: Watch
- Score: 50/100
- MOS: 0%
- Share Price: $292
- Sticker Price: $391
- In 1978 Bernard Marcus, Arthur Blank, Ron Brill, Pat Farrah, and Ken Langone founded Home Depot. The plan was to create the largest home-improvement superstore on the market. The first location opened in Doraville, GA (metro Atlanta area).
- The first two store locations were leased from JCPenney.
- In 1981, Home Depot went public.
- By 1984, Home Depot was operating 19 stores with sales of over $256M.
- In 1984, Home Depot acquired Bowater Home Center in Dallas.
- In the early 1980’s. Home Depot continued to open more stores although The Global Recession of 1982 was in full force. This caused debts to increase and revenues to decline and ultimately lead to the EPS falling 42%. To slow down debts, Home Depot decided to grow more slowly where in 1986 they only opened 10 stores.
- In 1989, Home Depot started to see significant momentum again and became the largest home improvement store in the US, surpassing Lowe’s.
- In 1991, Home Depot was searching for ways to refine its store. They decided to introduce installation services for windows and carpets.
- In 1995, Home Depot sales reached $10B while operating 350 stores.
- In 1997, Home Depot acquired Maintenance Warehouse for $245M. The reason for the purchase was Maintenance Warehouse was the leading direct-mail marketer of maintenance, repair, and operations supplies. Home Depot could now tap into the power of its marketing machine to sell more products to consumers.
- In 1999, Home Depot acquired Apex Supply, a wholesale distributor of plumbing, HVAC, industrial pipe, and fittings.
- In 2000, former GE executive Robert Nardelli became CEO.
- In 2001, Home Depot acquired Your Other Warehouse, a large plumbing distributor.
- In 2002, Home Depot entered the Mexico market by acquiring the home improvement chain Del Norte. That same year, Home Depot also started construction of stores in Mexicali and Tijuana.
- In 2005, Home Depot launched its online home-furnishings store, 10 Crescent Lane, and online lighting store, Paces Trading Company.
- In 2006, Home Depot acquired Home Decorators Collection.
- In 2006, Home Depot acquired Hughes Supply, the largest home retailer in the US, for $3.2B. Hughes Supply was acquired to better serve B2B customers.
- In 2007, Home Depot CEO, Robert Nardelli, was forced to resign over complaints of a heavy-handed management style and excessive compensation package even while the share price declined. Nardelli was paid $123M over 5 years and was also given a severance package of $210M which was further criticized by shareholders.
- Frank Blake stepped in as CEO, who previously served as vice chair of the board and executive vice president. Blake agreed to a much lower compensation package which was also driven by the success of the company. His management style also invited more collaboration among leaders as well as employees.
- In 2008 and 2009, through the Great Recession, Home Depot laid off several thousand employees and closed 54 stores. In 2009, sales totaled $71B, nearly $20B lower than the all-time high two years prior.
- In 2013, Home Depot opened two large distribution centers in Atlanta and Los Angeles.
- In 2014, Frank Blake stepped down as CEO and was replaced by Craig Menear. Blake moved into the role of chairman. Menear joined Home Depot in 1997, and served in various management positions including VP of Hardware, VP of Merchandising, Divisional Merchandise Manager, Senior VP of Merchandising, and EVP of Merchandising.
- In 2014, the company experienced a data breach. The cause was employees would type credit card numbers directly into computers if the point of sale machines wouldn’t accept the credit card magnetic stripe. After the breach, the practice was immediately stopped and Home Depot introduced a free year of credit monitoring through AllClearID for any customer who made the request.
- In 2015, Home Depot acquired Interline Brands for $1.6B from P2 Capital Partners, a private equity arm of Goldman Sachs.
- In 2017, Home Depot acquired The Company Store from Hanover Direct. The Company Store was founded in 1911, operating primarily as a catalog and online store.
- In 2022, Craig Menear announced he would step down as CEO and be replaced by Ted Decker.
How does Home Depot make money?
Here is a breakdown of revenue by product category.
- Indoor Garden 10.3%
- Appliances 9.4%
- Electrical/Lighting 8.9%
- Lumber 8.8%
- Tools 7.9%
- Plumbing 7.2%
- Kitchen and Bath 6.9%
- Paint 6.9%
- Outdoor Garden 6.8%
- Building Materials 6.5%
- Flooring 6.1%
- Hardware 5.2%
- Millwork 4.9%
- Décor/Storage 4.0%
This video from Motley Fool talks about two dividend stocks investors are adding to their portfolio right now including Home Depot and Target. The reason that Home Depot is a top choice is that they increased their annual dividend from $1.16 in 2013 to $6.60 in 2022 and EPS has grown by a compounded annual rate of 20% over the same time period.
This article from zacks.com states that Home Depot is currently the top-searched stock on its platform. The article also mentions the stock has a high buy rating because of the increasing EPS.
This article from fool.com talks about Home Depot and Lowe’s being strong dividend stocks. Although the market is slowing down with home building and home remodeling, that doesn’t mean investors should run from these stocks. Home Depot pays a dividend of $1.90 and Lowe’s pays a dividend of $1.05 which makes both stocks long-term buys.
This article from seekingalpha.com lists 15 dividend stocks to consider adding to your portfolio including Home Depot, Lowe’s, Visa, Mastercard, FMC, Morgan Stanley, Tractor Supply, T Rowe Price, Best Buy, Lam Research, Domino’s, Cigna Group, and SS&C Technologies.
For the latest news on this stock, please login to Tykr.
Home Depot (HD)
- Summary: Watch
- Score: 50/100
- MOS: 0%
- Share Price: $291
- Sticker Price: $391
- Revenue: $151B
- Stores: 2,300
- Countries: 4 (US, Canada, Mexico, and Puerto Rico)
- Summary: On Sale
- Score: 50/100
- MOS: 86%
- Share Price: $197
- Sticker Price: $772
- Revenue: $96B
- Stores: 2,200
- Countries: 3 (US, Canada, and Mexico)
Tractor Supply (TSCO)
- Summary: On Sale
- Score: 56/100
- MOS: 79%
- Share Price: $197
- Sticker Price: $587
- Revenue: $12B
- Stores: 2,000
- Countries: 1 (US)
Menards is a competitor and private company with 335 stores in 16 states including Wisconsin, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, West Virginia, and Wyoming. Their revenue is currently $11.8B.
❌ MOS: The score of 50/100 is okay but the MOS of 0% doesn’t show a lot of upside potential.
✅ Meaning: Home Depot has been a reliable department store for consumers, businesses, and contractors. In a world where e-commerce continues to rise, the need for physical stores still remains strong, especially for home building and renovation. Try to picture this scenario. If you’re working on something and you need a tool or component, the last thing you want to do is order online and wait several days to several weeks for it to arrive at your doorstep. With Home Depot, you can simply drive to the store, pick up what you need, and finish the job right away. I know in my experience, I’ll run to Home Depot, only to return home to realize I forgot something which motivates me to get back in the truck and head back to the store. Although I’m not pleased with myself when I have to return to the store a second or third time, it sure beats ordering online and waiting. I think most people are like me, once you start the job, you want to finish it.
✅ Moat: There are a few strong competitors in this industry including Lowe’s, Tractor Supply, and the private company, Menards. I see all three public companies being strong businesses that aren’t going away anytime soon. It’s also important to point out that Home Depot and Lowe’s are significantly larger stores that carry a lot more tools and supplies than Tractor Supply. Lowe’s is the largest with an average store size of 116,000 square feet. Home Depot comes in second at 105,000 square feet, and Tractor Supply comes in third at 15,000 square feet. Menards, although private, has an average size of 100,000 square feet. The larger stores with Home Depot and Lowe’s allow them to sell more products and generate more revenue.
✅ Management: Ted Decker currently serves as Chair, President, and CEO of Home Depot. He joined Home Depot in 2000 and served as Director of Business Valuation. He’s held several leadership positions including Senior Director of Business Valuation, Vice President, Senior Vice President of Strategic Business Development, and Senior Vice President of Retail Finance. Before joining Home Depot he worked in business development, strategic planning, and finance at Kimberly Clark and various positions in corporate finance, lending, and credit at PNC Bank. The Glassdoor rating is 3.8 and the CEO approval is 77%. For a retail company, it’s hard to have a higher rating because of high employee turnover and seasonal workers such as high school and college students working part-time. By comparison, Walmart has a Glassdoor rating of 3.3 and CEO approval of 62%, Lowe’s has a Glassdoor rating of 3.9 and CEO approval of 100%, and Tractor Supply has a Glassdoor rating of 3.6 and CEO rating of 79%. Although Decker doesn’t meet the 4.0 and 80% we’re looking for, I’m still going to give this M a green check because of his past experience and the fact that achieving higher ratings in retail is a little more difficult.
If you’re interested, you may complete your own 4M checklist on this stock or other stocks by logging into Tykr.
Now let’s take a look at the financials. A wise investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
Revenue (Found on the Income Statement)
- 2019: $108B
- 2020: $110B
- 2021: $132B
- 2022: $151B
- Revenue has consistently increased which is a great sign.
Net Income (Found on the Income Statement)
- 2019: $11B
- 2020: $11B
- 2021: $12B
- 2022: $16B
- Net Income has increased in 2022 which is a great sign.
EPS (Found on the Income Statement)
- 2019: 9.73
- 2020: 10.25
- 2021: 11.98
- 2022: 15.59
- EPS year over year has increased which is a great sign.
Free Cash Flow (Found on the Cash Flow Statement)
- 2019: $10.6B
- 2020: $11B
- 2021: $16.3B
- 2022: $14B
- Free Cash Flow has slightly declined since 2021 which is okay.
Total Assets (Found on the Balance Sheet)
- 2019: $44B
- 2020: $51B
- 2021: $70B
- 2022: $71B
- Total Assets have consistently increased which is a great sign.
Total Liabilities (Found on the Balance Sheet)
- 2019: $45B
- 2020: $54B
- 2021: $67B
- 2022: $73B
- Total Liabilities have increased which is okay. This is most likely due to hiring more employees. Payroll is typically the highest liability on a balance sheet.
Total Debt (Found on the Balance Sheet)
- 2019: $28B
- 2020: $29B
- 2021: $38B
- 2022: $46B
- Total Debt has increased which is okay. Opening Home Depot store locations require a lot of capital. They are most likely taking loans to fuel growth.
Total Equity (Found on the Balance Sheet)
- 2019: -$1B
- 2020: -$3B
- 2021: $3B
- 2022: -$1.7B
- Total Equity is a calculation of Assets – Liabilities. In this case, you can see that Home Depot’s liabilities are greater than its assets. This is a contributor to why the score is not higher.
Home Depot pays a dividend and will most likely continue to generate positive returns for long-term shareholders. Will this stock generate big returns like a high-profit margin technology company? Absolutely not. But if you’re looking for slow and steady growth with dividend payouts, this may be a stock for your portfolio.
The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
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