Home Depot Financial Analysis Essay

Financial Analysis

The Home Depot has consistently produced excellent financial numbers, especially over the past few years. These results solidify them as the leader in the industry. Strong financials and pure size of the company are two contributing factors to success. As importantly, statistical analysis show The Home Depot to be an extremely well managed corporation. Total sales from Q3 2016 totaled $22.15 billion, an increase of 6.1% from the year prior. The Home Depot’s last reported earnings were $5.46/share. This number is very attractive to investors as it shows that the company is highly profitable. There price/earning ratio sits somewhere around industry average at 22.10. Investors are confident enough in future growth that they

The Home Depot has paid a dividend each quarter since the 1990’s, raising dividends on every fourth occasion. They even continued to roll out dividends during the financial crisis in 2008 and 2009. For a company so dependent on the housing market this is extremely impressive, and speaks volumes about financial strength. Management currently promises on returning 50% of earning each year through quarterly dividends. They are also committed to reducing share count. Over the past ten years, total number of outstanding shares has dropped 40%. The company is very committed to investing money back into own stock thus increasing share price and

However with few exceptions, The Home Depot outperforms Lowe’s considerably. Lowe’s did outperform The Home Depot in revenue growth this most recent quarter, but this is just a snapshot when in reality both The Home Depot and Lowe’s have been experiencing very similar growth for years. Next is Earnings/Share, The Home Depot is earns over two times more than Lowe’s for one dollar of share price. Key differences can be found in profit margins, debt vs equity, and return on equity. The Home Depot has a considerably higher profit margin when compared to the margin of Lowe’s, and is much better at turning invested capital into equity. Debt - Equity ratio was included to show that both companies are financed with a large portion of debt, yet remain