How Home Depot Will Fix Itself Up in 2012

With 2012 just beginning, now's a great time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Home Depot (NYSE: HD  ) . As I discussed last month, Home Depot did a great job in making shareholders happy in 2011, as it raised its dividend twice and bought back more than $3 billion in shares. But will the housing market finally give Home Depot the long-awaited push it needs for 2012? Below, I'll take a closer look at what people expect from Home Depot and its rivals.

Forecasts on Home Depot

Median Target Stock Price $43
Fiscal 2012 EPS Estimate $2.39
Fiscal 2013 EPS Estimate $2.74
Expected Annual Earnings Growth, Next 5 Years 14%
Forward P/E 15.8
CAPS Rating ***

Source: Yahoo! Finance.

Can Home Depot repeat in 2012?
As you can see, analysts aren't sure what to make of Home Depot right now. The typical target stock price is actually below current levels, showing that analysts haven't quite caught up to the company's share-price growth in 2011. But earnings expectations show continuing healthy growth for the company.

The differing opinions reflect all the uncertainty going on in housing-related companies lately. Beazer Homes (NYSE: BZH  ) and Hovnanian (NYSE: HOV  ) have both seen sizable increases in net new orders for their most recent quarters. But when you look at their overall sales figures, they still stand at just a small fraction of their total revenue from the housing boom. It's unclear whether those heady times will ever come back -- and bring Home Depot's revenue back to its 2005-2006 peak as well.

The uncertainty isn't unique to Home Depot. Lowe's (NYSE: LOW  ) has the same mix of weak target stock price combined with quite reasonable growth prospects. Analysts also see Lumber Liquidators (NYSE: LL  ) as having only minimal upside but potentially growing even faster than Home Depot. Yet what links the fortunes of all three companies together is the macroeconomic picture.

As 2012 gets off on a promising foot in housing, Home Depot could be a prime beneficiary. The question is whether the latest good news will be just another head-fake -- or the real thing.

Housing and home improvement aren't surefire winners for 2012, but we think we've found a better prospect. Look at the Motley Fool's newest special report to find our top stock pick for 2012. It's free, but only for a limited time -- so check it out now.

Click here to add Home Depot to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Lumber Liquidators. Motley Fool newsletter services have recommended buying shares of Home Depot, Lumber Liquidators, and Lowe's, as well as writing covered calls in Lowe's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

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Related Tickers

10/25/2016 4:01 PM
HD $123.34 Down -4.44 -3.47%
Home Depot CAPS Rating: ****
BZH $10.86 Down -0.41 -3.64%
Beazer Homes USA CAPS Rating: **
HOV $1.58 Down -0.05 -3.07%
Hovnanian Enterpri… CAPS Rating: **
LL $18.48 Down -0.55 -2.89%
Lumber Liquidators CAPS Rating: ***
LOW $68.47 Down -2.51 -3.54%
Lowe's CAPS Rating: ****