Fundamental Analysis

When The Home Depot was founded in 1978, Bernie Marcus and Arthur Blank had no idea how revolutionary this new “hardware store” would be for home improvement and the retail industry.

Today, we’re proud to be the world’s largest home improvement retailer. In more than 2,200 stores across North America, we aspire to excel in service – to our customers, associates, communities and shareholders.


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Reasons to buy – HOME DEPOT

High level decisions on buy or sell for a stock should be driven by

1. The margin that the company makes. i.e. Out of $1 that the company sells how much does the company taken home.

    • Here we see HOME DEPOT makes a margin of 13.6% on Operating Level and about 9.6% on Net level. This means that out of $1 that it makes $0.096 is being pocketed as profits.

2. The growth rates of the company on revenue, net income, EPS and Dividend. i.e. If it sold $1 last year how much more did it sell this year.

    • Here we see net revenue growth of 4% in the revenue and the net profit figures grew by 20%.

3. The efficiency ratios of the company on Equity and Assets. i.e. How well is the company able to sweat each $1 that it puts to work in the company.

    • Here we see HOME DEPOT makes a Return on Assets of 20% and Return of Equity of 570% which is pretty good.

Given that a ton of house owners in the US keeping walking into Home Depot for anything starting from snicker bars to the huge equipment’s required for the barbecue parties though the Debt to Equity stands out it is possibly a good buy once you are done with all the other Gold standard stocks.

All these ratios can be found in the attached excel sheets and are based on the EDGAR report submitted by HOME DEPOT to the SEC. All the data on the above analysis can be found at the link below


Balance Sheet

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Income Statement

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