In this article I will analyze Home Depot Stock based in its earning per Share (EPS) and its Price/Earning (P/E) ratio.
First, we need to see how was HD’s EPS doing in the last six years. By browsing HD’s EPS for the last years , I found that HD’s EPS increased form 7.2$ in year 2017 until it reached to 16.6$ in 2022, with compound growth rate is 18.18%, as shown below:
Now we will estimate HD’s (EPS) in year 2027 to see how much will it be by applying the following equation:
FV=PV(1+i)n
- Where PV = HD’s EPS in year 2022 = 16.6$
- i = growth rate of HD’s EPS estimated above = 18.18%
- n = years of investment = 5 years in 2027
By plug in the data that we mentioned above in the formula, we end up with projected EPS for Home Depot in 2027 which will be 38.27$.
Second, that we have HD projected EPS for year 2027 which is 38.27$, all what we have to do is to find the lowest (P/E) ratio for Home Depot in the last six years, and as we said in the previous analysis we are looking for the lowest (P/E) ratio because we are conservative investors.
The lowest (P/E) ratio for HD for the last six years was 17.14 which was in year 2019.
Finally, all what we have to do is to multiply the (P/E) ratio that mentioned above to the projected Home Depot’s EPS for year 2027 to find the price of HD’s stock in year 2027 which is as following:
Home Depot’s Stock Price In 2027 = (38.27)*(17.14)= 655.95$
Home Depot has a tremendous EPS growth rate, and it never recorded a negative EPS even during the COVID-19 Crisis, so it is fair to say that the projected stock price in year 2027 that estimated using the forecasted HD’s EPS in year 2027 is reliable.
In conclusion, if someone invest 10,000 $ and bough HD stock in today price which is as of writing this article is 326.68$ , she will make 20,079.3$ in year 2027, which means that she double her money in five years.
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