Home Depot's common shares have a technical downside risk to 48 short-term. My model suggests a reliability factor of 70% that it is achieved in the next weeks.
The company's common should present compelling value at 1.5x-2x sales for a rebound to a higher stock price, if the above comes to pass, and longer-term, 1.2x sales, as the stock falls to this anticipated valuation in the next leg-down for a second rally attempt.
A p/e at 2/3rds the sales growth-rate is a fair measure for the business they are engaged in, and again, if the above occurs, the common shares may reflect it. This is predicated on a economic environment that is a bit different than that commonly expected in the next couple of years. But, again, should HD arrive at 48 soon, it may indicate the change is upon us. In a year, it would be evident to most.
It is a good company, but now priced in excess of its ability to achieved a fair return on invested capital, if you were to buy the common at current levels.
Best regards,
T.V.H. |
