Yahoo Finance Is The Home Depot, Inc. (NYSE:HD) Potentially Undervalued?
The Home Depot, Inc. (NYSE:HD) saw significant share price movement during recent months on the NYSE, rising to highs of US$340 and falling to the lows of US$281. 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$288 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.
View our latest analysis for Home Depot
What's The Opportunity In Home Depot?
According to my valuation model, Home Depot seems to be fairly priced at around 8.41% above my intrinsic value, which means if you buy Home Depot today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $265.60, there’s only an insignificant downside when the price falls to its real value. Furthermore, Home Depot’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Home Depot generate?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -0.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Home Depot. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? HD seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on HD for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on HD should the price fluctuate below its true value.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Home Depot, and understanding it should be part of your investment process.
If you are no longer interested in Home Depot, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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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