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published in Blogs
Aug 21, 2019

Home Depot beats on EPS, misses on revenue, and cut its forecast

When companies report earnings, expectations mean everything. In the case of home improvement retailer Home Depot (NYSE: HD), expectations must not have been too high. The company beat on its EPS estimates with actual earnings of $3.17 versus estimates of $3.08. While that is good news, the company missed on its revenue estimate and it issued a lower revenue forecast for 2019 as a whole. Normally, beating EPS estimates by a small margin, missing on revenue estimates and issuing a more cautious outlook would send a stock down. But that wasn’t the case for Home Depot on Tuesday. The stock gained 4.65% on the day while the overall market was lower.

From a fundamental perspective, Home Depot has been pretty solid over the last few years. The company has been able to grow earnings at a rate of 22% per year over the last three years. The profit margin is also solid at 13.7%. The operating margin is at 14.59% and return on assets is at 20.36%. The return on equity wasn’t available at the time of this writing due to the recent earnings report.

One of the things that helped Home Depot move higher was a share buyback program that reduced the number of shares outstanding dramatically.

The Tickeron SMR rating for this company is 2, indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.

The Tickeron Valuation Rating of 5 indicates that the company is seriously undervalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. The stock’s price-to-book ratio is below average for the industry and its P/E ratio is also below average.

The Tickeron Profit vs. Risk rating for this company is 17, indicating a low risk on high returns. The average Profit vs. Risk rating for the industry is 62, placing this stock better than average.

The chart for Home Depot shows the stock trending higher within a trend channel over the last eight months. The upper rail connects the highs from November and April. The lower rail connects the lows from December, May, and now August.

The daily stochastic readings were in oversold territory just ahead of the earnings report and turned sharply higher after the report.

The weekly chart shows that the stock is approaching an all-time high while the overbought/oversold indicators are not yet in overbought territory, but are closing in on those levels.

Sentiment toward Home Depot is a little more bearish than the average stock. There are 32 analysts following the stock with 20 “buy” ratings, 11 “hold” ratings, and one “sell” rating. This puts the overall buy percentage at 62.5% and that is slightly below the average range of 65% to 75%.

The short interest ratio is currently at 3.54 and is also slightly above average. The total number of shares sold short had been creeping up ahead of the earnings report and that is an indication of increasing pessimism.

The overall picture for Home Depot is rather positive with the solid fundamentals, the solid upward trend in the price, and the slightly more pessimistic sentiment toward the stock. Of course the lowered forecast is a bit of a concern and the company cited the tariffs on Chinese goods as part of the issue. The company also cited falling lumber prices for the lowered sales forecast.

Related Ticker: HD

HD's RSI Oscillator peaks and leaves overbought zone

The 10-day RSI Indicator for HD moved out of overbought territory on March 22, 2024. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 50 instances where the indicator moved out of the overbought zone. In of the 50 cases the stock moved lower in the days that followed. This puts the odds of a move down at .

Price Prediction Chart

Technical Analysis (Indicators)

Bearish Trend Analysis

The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 66 cases where HD's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .

The Momentum Indicator moved below the 0 level on April 01, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on HD as a result. In of 90 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .

The Moving Average Convergence Divergence Histogram (MACD) for HD turned negative on March 27, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 50 similar instances when the indicator turned negative. In of the 50 cases the stock turned lower in the days that followed. This puts the odds of success at .

Following a 3-day decline, the stock is projected to fall further. Considering past instances where HD declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

HD broke above its upper Bollinger Band on March 20, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Bullish Trend Analysis

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where HD advanced for three days, in of 363 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 344 cases where HD Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 75, placing this stock better than average.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. HD’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: HD's P/B Ratio (344.828) is very high in comparison to the industry average of (9.840). P/E Ratio (24.357) is within average values for comparable stocks, (35.489). Projected Growth (PEG Ratio) (2.045) is also within normal values, averaging (2.551). Dividend Yield (0.023) settles around the average of (0.035) among similar stocks. P/S Ratio (2.415) is also within normal values, averaging (84.820).

Notable companies

The most notable companies in this group are Home Depot (NYSE:HD), Lowe's Companies (NYSE:LOW), AutoZone (NYSE:AZO), Tractor Supply Company (NASDAQ:TSCO), Ulta Beauty (NASDAQ:ULTA), Best Buy Company (NYSE:BBY), Bath & Body Works (NYSE:BBWI), Five Below (NASDAQ:FIVE), RH (NYSE:RH), Advance Auto Parts (NYSE:AAP).

Industry description

The specialty stores sector includes companies dedicated to the sale of retail products focused on a single product category, such as clothing, carpet, books, or office supplies. A specialty store could face intense competition from big-box departmental chains, and therefore offering an adequate collection of the product type it specializes in is key in maintaining/growing its market.

Market Cap

The average market capitalization across the Specialty Stores Industry is 7.98B. The market cap for tickers in the group ranges from 48 to 380.15B. HD holds the highest valuation in this group at 380.15B. The lowest valued company is CALI at 48.

High and low price notable news

The average weekly price growth across all stocks in the Specialty Stores Industry was 4%. For the same Industry, the average monthly price growth was 1%, and the average quarterly price growth was 49%. CZOO experienced the highest price growth at 134%, while SPEV experienced the biggest fall at -33%.

Volume

The average weekly volume growth across all stocks in the Specialty Stores Industry was 30%. For the same stocks of the Industry, the average monthly volume growth was 43% and the average quarterly volume growth was 68%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 49
P/E Growth Rating: 53
Price Growth Rating: 52
SMR Rating: 67
Profit Risk Rating: 75
Seasonality Score: 5 (-100 ... +100)
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A.I.Advisor
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published General Information

General Information

a retailer of assortment of building materials and home improvement products

Industry SpecialtyStores

Profile
Fundamentals
Details
Industry
Home Improvement Chains
Address
2455 Paces Ferry Road
Phone
+1 770 433-8211
Employees
463100
Web
https://www.homedepot.com
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