Is the selloff from Home Depot's earnings overdone?
Home improvement retailer Home Depot (NYSE: HD) reported earnings on November 19. The company beat its EPS estimate, but missed its revenue estimate and lowered its revenue forecast for the year. The stock has tumbled 8.5% since the earnings report. Personally, I think the selloff is overdone and is providing investors with an opportunity at this time.
Home Depot has seen its earnings grow by 21% per year over the last three years and earnings were up 1% in the third quarter. Revenue has increased at a rate of 6% per year over the last three years and they were up by 4% in the third quarter.
When you combine the sales growth with the profit margin and the return on equity, you get the Tickeron SMR rating. Home Depot's SMR rating is 1 and that is the best rating a company can get. It indicates 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.
In addition to the SMR rating being well above average, the Profit vs. Risk Rating for Home Depot is 19, indicating low risk on high returns. The average Profit vs. Risk Rating for the industry is 60, placing this stock well above average.
The Tickeron PE Growth Rating is 38, pointing to consistent 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. A rating of 1 indicates highest PE growth while a rating of 100 indicates lowest PE growth.
Not all of Home Depot's ratings are above average. For instance, the Valuation Rating is at 64 and it indicates that the company is fair valued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. With the 64 rating, the company is slightly worse than average on its valuation rating.
The same can be said for the Price Growth Rating, Home Depot is slightly worse than average with a rating of 69. This rating indicates that stock price has grown at a slightly slower pace than S&P 500 components. The Price Growth Rating looks at price growth over the last 12 months.
Looking at the daily chart for Home Depot over the past year, the stock has been trending higher with a trend channel marking the various cycles within the overall upward trend. The lower rail of the channel is formed by the low from last December and the lows from May and August. The stock just hit the lower rail earlier this week.
We also see on the chart that Home Depot's overbought/oversold indicators have both reached oversold territory as a result of this pullback. The stochastic readings made a bullish crossover on November 25 and that could be a sign that the stock is ready to bounce.
The sentiment toward Home Depot is average to slightly skewed to the bearish side. There are 33 analysts covering the stock with 19 "buy" ratings, 13 "hold" ratings, and one "sell" rating. This puts the overall buy percentage at 57.6% and that is a sign of slightly more pessimism than the average stock.
The short interest ratio is at 3.1 and that reading falls in the average range. This reading is from October 31 and doesn't reflect what has happened to short interest since the earnings report. We should get the mid-November reading in the next few days and the end of November report will come out in the second week of December. That will be the first short interest report that reflects what has happened since the earnings report.
HD in upward trend: price expected to rise as it breaks its lower Bollinger Band on April 07, 2025
HD may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options. In of 28 cases where HD's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where HD's RSI Oscillator exited the oversold zone, of 22 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Momentum Indicator moved above the 0 level on April 22, 2025. You may want to consider a long position or call options on HD as a result. In of 85 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for HD just turned positive on April 10, 2025. Looking at past instances where HD's MACD turned positive, the stock continued to rise in of 50 cases over the following month. The odds of a continued upward trend are .
HD moved above its 50-day moving average on May 07, 2025 date and that indicates a change from a downward trend to an upward trend.
The 10-day moving average for HD crossed bullishly above the 50-day moving average on May 09, 2025. This indicates that the trend has shifted higher and could be considered a buy signal. In of 15 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where HD advanced for three days, in of 349 cases, the price rose further within the following month. The odds of a continued upward trend are .
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 50-day moving average for HD moved below the 200-day moving average on April 08, 2025. This could be a long-term bearish signal for the stock as the stock shifts to an downward trend.
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 .
The Aroon Indicator for HD entered a downward trend on April 15, 2025. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
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 73, placing this stock better than average.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent 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 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 (10.858). P/E Ratio (24.357) is within average values for comparable stocks, (34.733). Projected Growth (PEG Ratio) (2.045) is also within normal values, averaging (2.738). Dividend Yield (0.023) settles around the average of (0.034) among similar stocks. P/S Ratio (2.415) is also within normal values, averaging (20.083).
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a retailer of assortment of building materials and home improvement products
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