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Non-Tech : Home Depot (HD)
HD 336.48-6.0%Nov 18 3:59 PM EST
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To: MFahsel who wrote (62)10/20/1997 6:27:00 PM
From: Keith Fauci   of 1169
 
I think trading at a 37 pe is under valued in this market. Many growth companies are trading well above a 1998 pe of 37. With HD just starting to move into Canada and South America, I forsee a 25+ growth rate. A good formula I learned here on SI is Stock Price /next years estimated earnings / expected 5 year growth rate. A number <1 is undrvalued between 1 and 1.25 fairly valued and over 1.25 overvalued. Of cource this is only one formula and does not work for all industries or account for other variables such as competition ect. but applying this formula for HD gives us 54 / 2 / 25 = 1.08 on the low side of value if you consider they may grow faster than 25% This does not even take into consideration the cash flow involved in building new stores that does not make it to the bottom line YET! IMHO

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