Shares of Home Depot (NYSE: HD ) hit a 52-week high today. Let's look at how the company got here and see whether there are clear skies ahead.
How it got here
America's do-it-yourself store has been on the steady train to gains because of two key drivers. First, Home Depot has been able to maximize workforce utilization and new technology in its stores to take market share from competitors such as Lowe's (NYSE: LOW ) . Second, Home Depot is benefiting from being on the swinging end of a double-edged sword. As a primary stop for contractors and consumers for home-related projects, Home Depot finds itself in a prime position to capitalize on upticks in the homebuilding sector as well as consumer home remodels. It's the best of both worlds.
Remodels appear to be a real high-margin growth area for Home Depot, with many of its peers signaling strength. Hardwood-flooring specialist Lumber Liquidators (NYSE: LL ) reported a 14% jump in sales in the fourth quarter, while Griffon (NYSE: GFF ) , a manufacturer of garage doors, saw its sales rise 9% in its first quarter.
How it stacks up
Let's see how Home Depot stacks up next to its peers.
HD data by YCharts
As expected, the past five years haven't been easy on home-improvement stores, but three of the four are up by double digits.
Price/ Cash Flow
|Sherwin-Williams (NYSE: SHW )
For the most part, these companies are trading very much in line with one another. Paint specialist Sherwin-Williams is a tad pricey at 8 times book, and Lumber Liquidators won't be paying you a dividend, but on the all, these companies tend to trade in tandem. The real differentiating factor remains Home Depot's ability to continue to take market share from its peers.
Now for the real question: What's next for Home Depot? That question really depends on whether the company can continue to take market share from its peers or Lowe's can figure out a way to stop the bleeding.
Our very own CAPS community gives the company a three-star rating (out of five), with 78% of members expecting it to outperform. I consider myself part of the 78%, since I made a CAPScall of outperform on Home Depot, which is currently up 30 points. Home Depot is in the sweet spot of the retailing sector, hitting both sides of the homeowner's market (construction and remodels), and it packs a very impressive dividend to boot. I see no reason Home Depot won't head higher from here.
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