Optimistic Revenue Growth Expectations Through 2021 Will See Home Depot’s Value Rise >10%

Home Depot ( HD ) is the largest home improvement retailer in the U.S., with approximately a 25% market share. The retailer has enjoyed solid growth so far in 2016, reaffirming its guidance of 6.3% sales growth and 4.9% comp sales growth for the full year, and now expects full-year EPS to grow 15.9% to $6.33, up from the estimate of $6.31 after Q2, the estimate of $6.27 after Q1, and the estimate of $6.12-$6.18 after 2015 full-year results announcements. Much of this growth is fueled by booming home improvement spending. Low inventory of homes for sales has prompted home price appreciation and led to bidding wars, which, in turn, has prompted owners of houses to add value to their present homes through remodeling and repairs. The declining months’ supply metric indicates that the current for sale inventory wouldn’t last as long as it has historically, given the current sales rate, if no additional new houses are built. This has boosted prices of homes, which are also rising due to the low mortgage rates and the gradual appreciation after the period of recession. The low supply of homes has been a major factor in driving the home prices up. Low activity of construction companies has meant that there is a mismatch between demand and supply of homes.

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