Why Home Depot’s Share Climbed 1.6x In 3 Years

by Trefis Team
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Home Depot‘s (NYSE: HD) stock price has increased more than 1.6x from $134/share in August 2016 to $220/share in August 2019. The increase was primarily driven by a continuous increase in Total Revenue, Net Income margin, and the buyback of shares. Revenue growth and margin increase are expected to continue in 2019. Price-to-Earnings (P/E) multiple of the company has seen a small increase compared to 2016.

You can view the Trefis interactive dashboard – Home Depot: Why did the stock grow 1.6x in 3 years? In addition, here is more Consumer Discretionary data.

 

Home Depot’s Revenue saw a steady increase over the years

  • Home Depot’s revenues have increased by 14.4% from $94.6 billion in 2016 to $108.2 billion in 2018, adding close to $13.6 billion to its revenue base.
  • Revenues are further expected to increase at a rate of 2.9% to $111.3 billion in 2019, which would mark an addition of over $16.7 billion to total revenues over the period 2016-2019.
  • Higher revenue is likely to be driven by strong performance of revenue per square per foot metric.

 

Profitability and Multiple:

  • Net Income margin remained nearly flat at around 8.4% and 8.6% in 2016 and 2017 respectively, it increased sharply to 10.3% in 2018, primarily due to lower effective tax rate which declined from around 37% in 2016 and 2017 to 23.6% in 2018. Net income margin is expected rise further to 10.9% in 2019, by better operational efficiency.
  • Home Depot’s P/E multiple saw a small increase from 20.5x in 2016 to 20.9x in August 2019. Lowe’s meanwhile saw an increase in its P/E multiple in 2019 and was at 33.2x in August 2019 after posting good results in 2018 and the first 2 quarters of 2019.
As discussed, growth in revenue and net income margin seem to be the primary drivers of Home Depot’s Price rise and are expected to continue to lead the stock’s growth.

 

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