Analyzing Home Depot Stock as a Potential Portfolio Builder

What you need to know about HD ahead of its November 17 earnings report

facebook X logo linkedin

Although Home Depot, Inc. (NYSE:HD) only operates in the U.S., Canada, and Mexico, it is still the largest home improvement company in the world. Home Depot will be reporting its fiscal fourth quarter earnings next week on November 17, before the open. HD has gained 26% year-to-date, and has more than doubled since bumping into its 52-week low of $140.63 on March 18. A post-earnings pop next week will be needed though, for the shares to take aim once more at their Aug. 27 52-week high of $292.95.

Home Depot has beat expectations on four out of its five most recent earnings reports. In the fiscal fourth quarter of 2019 Home Depot beat expectations by $0.01, reporting an EPS of $2.53. According to the company's fiscal first quarter of 2020, Home Depot again beat expectations. Though Home Depot reported a drop in its EPS to $2.28, the company beat earnings expectations by a margin of $0.18 per share. Following its three earnings wins, Home Depot posted an earnings miss for its fiscal second-quarter of 2020. Home Depot's reported EPS was dropped to $2.08 and the company missed expectations by $0.19.

Most recently for the fiscal third-quarter of 2020, Home Depot beat its target by 8%. The company reported an earnings per share (EPS) of $4.02 instead of the expected EPS of $3.71. As for the company's upcoming earnings report next week, Home Depot is expected to announce an EPS of $2.99 for its fiscal fourth quarter

An unwinding of pessimism in the options pits could also push the security higher. This is per HD's Schaeffer's put/call open interest ratio (SOIR) of 1.18, which sits in the elevated 86th percentile of its annual range. This suggests short-term option traders have rarely been more put-biased.

What's more, options are an intriguing route. That's because even with earnings looming, HD's Schaeffer's Volatility Index (SVI) of 33%, which sits higher than just 18% of readings from the past 12 months. This implies that options players are pricing in relatively low volatility expectations at the moment.

 HD has a forward dividend of $6.00 and a dividend yield of 2.22%. The last dividend the company paid was $1.50 per share. Home Depot has continued to grow its dividend at a decent rate since 1987.

Home Depot continues to demonstrate consistent revenue growth and net profits increases year after year, and the company shows no fundamental signs of wavering. However, investors should mind their expectations for how much stock growth the company has in it from now. With a price-earnings ratio of 25.24, Home Depot stock already trades at a high price. Overall, HD offers the high returns as a dividend play and less as a long-term stock investment targeting growth.


Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.

Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!