Is The Home Depot Inc (HD) overvalued?
On Equity Rank's model estimate, HD trades 35% above its fair value. The Home Depot Inc (HD) last closed at $343.47; the multi-method model fair value is $254.96.
| Price | Model fair value | Price vs model |
|---|---|---|
| $343.47 | $254.96 | 35% above |
What the answer rests on
- 1 of 10 valuation methods put HD's value above its price and 9 put it below, so the methods mostly agree.
- To justify today's price, HD's free cash flow would need to grow about 9.9% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 3.2% a year.
- HD trades at 24.9 times its last year's earnings, against a median of 19.3 for 72 profitable Consumer Discretionary companies.
- Over the past year the price sat below the model fair value on 0% of trading days. The gap ranged from 16% above to 37% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind HD's fair value · What prices assume · Other companies