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Home Depot | Description

The Home Depot owns and operates 1,471 do-it-yourself warehouse retail stores offering building materials, home improvement products and related furnishings.

For the FY ended 1/30/05, revenues rose 13% to $73.09B. Net income rose 16% to $5B. Revenues reflect increased sales due to the opening of

new stores. Net income also reflect improved gross profit margins due

to lower cost of merchandise sold as a percentage of revenue.

Home Depot | Current Ratio Definition: Current Assets / Current Liabilities

Current is short-term Current Assets: Money, Inventory Current Liabilities: Short-term debts

Debts are IOUs General idea: A company is generally considered

financially healthy when current assets are equal or higher than current liabilities.  

What to look for: Current Assets > Current Liabilities Home Depot’s Balance Sheet [Diagram]

Recommendation: A current ratio of 2. Good (1.395)

Home Depot | Debt/Equity Ratio Definition: Long-Term Debt / Equity

Long-Term Debt Equity: Total assets – Total Liabilities     

General idea: A higher debt/equity ratio generally means that a company has been aggressive in financing its growth with debt.

What to look for: A low Debt/Equity Ratio. The lower the ratio, the better. Home Depot’s Balance Sheet [Diagram]       Home Depot: Long term debt / Equity = Ratio

Year 2004 856,000 / 22,407 = 0.038 Recommendation: Ratio of 0.1. Great (0.038)

Home Depot | P/E Ratio Definition: Price / Earning

The price of the stock / the year earnings of a company.

Earnings: Earning in EPS (Earnings per share) General Idea: The higher the P/E ratio, the higher the

speculation of the company’s future earning performance What to look for: Depends. Optimistic: High P/E ratio.

Conservative: Low P/E ratio Home’s Depot Income Statement - Look at EPS Home Depot’s Quote Ratio: 17.09

Recommendation: P/E ratio of 15. Great (17.09)

Home Depot | Growth Rates Definition: The compounded annualized rate of growth of

a profit, earnings, revenues, etc. Relative measurement (percentage):

(This year’s profit – Last year’s profit) / (Last year’s profit)

General Idea: Higher the growth rate, higher the risk. Want to look for growth.

What to look for: Depends. Risk taker vs. Risk averse Home’s Depot Income Statement Revenue Growth: (64,816.0 - 58,247.0) / (58,247. 0 )

= 11% Recommendation: 10 to 15% growth rates. Great (11%)

Home Depot | Earnings Earnings: The net income of a company during a specific period. Generally, but not necessarily,

referring to after-tax income. Earnings are perhaps the single most studied number in a company's financial statements. They show how

profitable a company is.

Earnings Estimate: An analyst's estimate for a company's future quarterly or annual earnings. Analysts use forecasting models, management

guidance, and fundamental information on the company in order to derive an estimate.

Earnings Surprise: When the earnings reported in a company's quarterly or annual report are above or below analysts' earnings estimates. When a positive earnings surprise occurs, share price

will usually increase. A negative earnings surprise will usually result in a decline in share price.

Earnings Growth Rate: indicators that reflect the opinions of industry analysts as to the growth potential of a company's earnings. The data is supplied by an outside service.

Guidance has a role in the market because it provides information that can be used by investors to analyze the company, evaluate management, and create forecasts. Companies are foolish if they think that they can alter the

market's short-term focus. The Street will still do what it wants, and it will stay

focused on quarterly timelines. If, however, more companies opt for no guidance, the

Street may inadvertently become more rational and stop whipsawing stock prices for miniscule variances.

Home Depot | Insider Trading

Institutional Ownership

% Shares Owned 63.682

# of Institutions 2,436.00

Total Shares Held (Mil) 1,398.434

3 Mo. Net Purchases (Mil) 114.851

3 Mo. Shares Purchased (Mil) 160.765

3 Mo. Shares Sold (Mil) 45.913

Insider Trading (Prev. 6 months)

Net Insider Trades -6.00

# Buy Transactions 1.00

# Sell Transactions 7.00

Net Shares Purchased (Mil) -0.251

# Shares Purchased (Mil) 0.005

# Shares Sold (Mil) 0.256

Insider Trading: The buying or selling of a security by someone who has access to material, nonpublic information about the security.

Insider trading can be illegal or legal depending on when the insider makes the trade: Illegal when the material information is still nonpublic. Trading while having special knowledge is unfair to other

investors who don't have access to such knowledge.  Includes: tipping others when you have any sort of nonpublic information. Directors are not the only ones who have the potential

to be convicted of insider trading. People such as brokers and even family members can be guilty. Legal once the material information has been made public, at which time the insider has no direct advantage over

other investors. The SEC, however, still requires all insiders to report all their transactions. 

An executive, director or major shareholder sold a small number of shares recently. (Neutral) Shares are neither being accumulated heavily nor sold heavily by financial institutions. (Neutral for a large company)

Competitive Factors

Price

Store location

Customer service

Depth of merchandise

Home Depot vs. Lowe’s

55% of Lowe’s are within 5 miles of HD

HD commonly faces decline up to 15% when Lowe’s enters nearby

Industry saturated in 4 years?

Home Depot | Chart Analysis

Price Volume Moving Averages MACD RSI Stochastic

Price

VolumeThe number of trades in a security over a period of time.

Volume

Volume

Volume

Moving Averages (MA)An average of data for a certain number of time periods.

MACD (Moving Average Convergence/Divergence)

-Displays trend following characteristics

-Compares moving averages

RSI (Relative Strength Index)- Compares overbought (>70) and oversold (<30)

Stochastic Oscillator- A momentum indicator that measures the price relative to the high/low range over a set period of time.

Thank You!