Home Depot Share Forecast January 2022 – Time to Buy HD?

Home Depot Share Forecast January 2022 – Time to Buy HD?

Shares of home improvement retailer Home Depot (NYSE: HD) are in the red today, after closing at $405.76 as of January 6^th (19:58 EST). The company is currently benefitting from solid tailwinds, with its revenue growing twice as fast as its long-run rate. Home Depot shareholders were pleasantly surprised at one of the unintended consequences of government-mandated shutdowns of non-essential businesses.

Home Depot – Technical Analysis

The financial statement released by Home Depot indicates a market cap of $423.71 billion with total assets worth $73.031 billion. Revenue for 2020 was at $132.11 billion with a profit margin of 9.74% compared to $110.22 billion in 2019.

Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(62.64), Williams Percent Range (14)(−32.71), Bull Bear Power(−0.77) and Ultimate Oscillator (7, 14, 28)(50.22) are neutral. Moving averages such as Exponential Moving Average (20)(404.77),  Simple Moving Average (20)(404.13), Exponential Moving Average (30)(401.42), Simple Moving Average (30)(405.47) and Exponential Moving Average (50)(392.83) are indicating a buy action.

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Recent Developments

Home Depot has grown revenue at a compounded annual rate of 6.9% in the last decade. It revenue increased by 15.6% in the nine months ended on Oct. 31. Operating income increased by 28.8% in that same period. Sales at Home Depot were fuelled by do-it-yourself projects during the pandemic. Home Depot is also benefitting from rising home values. People are encouraged to spend on improvements, additions, and maintenance and that spending has certainly helped Home Depot.

Home Depot’s aim is to be a low-cost provider in the home improvement industry which requires the business to lag competitors when raising prices and lead when reducing prices. As the company does not pass higher costs on to consumers, this negativity can impact profitability in the near term. But Home Depot’s net income soared as a result of expanding margins while revenue has grown in the mid-single digits on a yearly basis over the past several years. Profit was $7 billion in fiscal 2015 and $16 billion over the trailing 12 month period. Home Depot remains popular among contractors and other professionals, who account for roughly 45% of sales.

Should You Buy HD Shares?

Investors should look at the company’s balance sheet for optimism. Home Depot recorded a net debt was $34.08 billion which translates to $39.15 billion in long-term debt less $5.07 billion in cash. It has generated $24.64 billion in earnings before interest, taxes, depreciation, and amortization over the past 12 months.

HD shares also offer investors a sustainable 1.6% dividend yield, which is moderately higher than the S&P 500’s 1.3% yield. It has plenty of room to keep growing its dividend going forward. But there are signs that the shares have outperformed the broad market.

This also means that the shares have been appreciated too much in too short of a time. Investors should also check rising home prices as it is one of the most important trends boosting the company right now. The Federal Reserve plans to raise interest rates at some point in 2022. But these are still not potential headwinds for Home Depot.

Demand for Home Depot could weaken if consumers shift their spending away from home improvement projects to other retail categories. But the company’s momentum is stronger than ever, based on the most recent quarter’s financial results. The company has already proven its investment merits due to steadily increasing revenue and profit over its long history. You can seriously consider the shares for your portfolio even if it approaches its all-time high.

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