Please ensure Javascript is enabled for purposes of website accessibility

Home Depot Inc. in 5 Charts

By Demitri Kalogeropoulos - Oct 14, 2017 at 4:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These five metrics explain why the home improvement giant is outpacing the stock market in 2017.

Home Depot (HD 0.74%) is beating the market by a wide margin this year, which makes it one of just a few major retailers to remain in Wall Street's good graces despite the disruption being caused by e-commerce specialists. There are many good reasons why investors continue to love this business.

Let's look at a few of the biggest.

A shopper inspects a piece of lumber at a home improvement warehouse.

Image source: Getty Images.

1. Sales growth

HD Revenue (TTM) Chart

HD Revenue (TTM) data by YCharts

Unlike smaller rival Lowe's (LOW 1.39%), Home Depot isn't aggressively adding to its store base. In fact, it has opened just one new location in the U.S. market since 2013. Yet the retailer is beating Lowe's in overall revenue growth thanks to its stronger customer traffic.

Comparable-store sales are on track to jump by nearly 6% this year to roughly match last year's banner result. Lowe's is expanding at a much more modest 3.5% pace.

2. Profitability

Home Depot strives to attract customers by providing good value, just as most retailers do. Yet shoppers also go to its stores in search of the best quality tools and materials for their home improvement needs. The company calls this approach "product authority," (as opposed to the "pricing authority" that a discount specialist might focus on) and it helps explain why Home Depot's profit margin is unusually high for a national retailer. 

HD Operating Margin (TTM) Chart

HD Operating Margin (TTM) data by YCharts

That growth has been a key factor behind Home Depot's doubling of its annual earnings over the past few years, with net income reaching $8 billion, or 8.4% of sales last year compared to $3.9 billion, or 6.1% of sales, in 2012.

3. Dividend expansion

HD Dividend Chart

HD Dividend data by YCharts

The management team is committed to a large and growing dividend payment. Home Depot's most recent raise was a 29% spike that marked the third time out of the past four years in which the dividend has grown by at least 20%. The company doesn't have nearly as long a streak of consecutive payout raises as Lowe's. However, it sends a larger portion of earnings to its shareholders, with a 55% target payout compared to Lowe's 35% commitment.

4. Earnings per share

HD EPS Diluted (TTM) Chart

HD EPS Diluted (TTM) data by YCharts

Home Depot has been an aggressive buyer of its own stock. It allocated $7 billion toward that goal in each of the last few years. As a result, earnings are growing much faster than net income on a per-share basis. They spiked 18% last year, 16% in 2015, and 25% in each of the prior two fiscal years.

5. Return on invested capital

HD Return on Invested Capital (TTM) Chart

HD Return on Invested Capital (TTM) data by YCharts

Home Depot's executive team has proven to be very effective at allocating capital. It's taken advantage of low long-term interest rates lately, for example, to raise funds that have allowed it to invest in the business while still buying back shares and increasing the dividend payment.

The company's 30% return on invested capital makes it one of the most efficient businesses on the market. Yet management's long-term plan calls for that figure to keep climbing and reach as high as 35% in 2018, at around the same time annual revenue passes $100 billion for the first time and operating margin approaches a market-crushing 15% of sales.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$311.97 (0.74%) $2.28
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
$201.84 (1.39%) $2.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.