Is Home Depot a Good Investment?

PHOTO CREDIT: Home Depot

OVERVIEW

The Home Depot Incorporation is a home improvement company based in the United States. The company sells a wide variety of products, ranging from small tools to garden and lumber products. The company offers services where contractors will come to a customer's house to install everything from floors and other large renovation projects. The company operates an e-commerce site along with over 2200 stores. The company was founded in 1978.

Why You Should?

  1. The Home Depot is a great reopening play in an investor's portfolio. This pandemic has reduced the demand for some products as construction and home improvement projects are deferred for more certain times. These times are right around the corner and Home Depot will report even better numbers than they have during this pandemic. This will benefit the company and investors as well.
  2. A Biden administration will benefit the company in many ways. In the future, the president wants to encourage spending on homes by offering tax incentives, credits, and deductions. Once this plan is passed into law, more people will flock to Home Depot in order to remodel their homes and take advantage of these tax incentives. This will benefit the company and investors.
  3. The COVID-19 pandemic has boosted the demand for some of the produces that Home Depot offers. As people stay home, they want to improve their home spaces for this pandemic and have time to take up hobbies like gardening. This has benefited Home Depot’s sales and has also benefited investors in the company.
  4. Home Depot has invested in the e-commerce space for a long time. This can be seen on their website and app as well as their in-store experience. This has helped the company report record numbers during this pandemic. Furthermore, this has also thrust the company into the future of home improvement. This will also benefit investors in the future.
  5. Home Depot recently acquired HD Supply Hardware. This company is one of the largest distributors of industrial equipment. This will benefit the company as they can acquire larger customers who tend to need higher quantities of goods for their projects. This will benefit the company’s distribution efforts and will also benefit investors in the company.
  6. Home Depot has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has helped the company grow by adding more stores, making more investments in e-commerce, and having a great dividend for its shareholders. This has also benefited investors, who have seen a well-performing stock price. In the financial year of 2020, the company reported revenues of around 110.22 billion and profits of around 11.24 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 108.2 billion and profits of around 11.12 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. Home Depot still faces tough competition from other large companies in the markets that it serves. Aside from small business competition, the company competes with Amazon, Walmart, Target, Lowes, ACE Hardware, and many other companies. This competition might hurt the company in the future and might also hurt investors.

MY OPINION

I think that Home Depot is a great long-term investment due to its position as a good reopening play, impacts from the Biden administration, impacts from the pandemic, good e-commerce investments, its acquisition of HD Supply, and rising revenues and profits. However, tough competition might hurt the company and its investors in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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