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Home Depot: Valuation First, Emotion Second

Hey Chris,
I certainly have considered that. As a long term position HD should probably continue to increase earnings, sales, cash flows, and so on. So the issue is the multiple and whether or not it's done contracting. I can't see Home Depot, a company growing EPS pretty much every year since 1990, trading less than 10x earnings with the homebuilders. And if it does trade that low, a long term time horizon will solve the issue -- they're probably going to earn ~$3.40 in operating year 2007. 20% downside would represent a mere 8x this figure, 1/2 the sector.

The value trap issue is a concern but I've run the numbers and it's a risk I'm certainly willing to take.

Thanks for the comment,
Kevin Kelly
ValueBlogger.com

Home Depot: Look for Improvements

Hey WC,
Kevin here. The macroeconomic issue of housing certainly plays an issue. The company has already said 06 #s should come in on the low side of issued guidance. That said, it's clearly a sector-wide issue as Lowe's, arguably the better company, has made similar announcements.

That said, I think the issue is probably priced in at this level and EPS/sales growth should still be positive.

Just my thoughts,
Kevin Kelly
ValueBlogger.com