Stock Analysis & Valuation The Home Depot, Inc. (HD.SW)

• Previous Close: CHF195.72
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, CHF	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method		n/a
Graham Formula	64.30	-67

Strategic Investment Analysis

Company Overview

The Home Depot, Inc. (HD.SW) is the world's largest home improvement retailer, operating over 2,300 stores across the United States. Headquartered in Atlanta, Georgia, the company serves both do-it-yourself (DIY) homeowners and professional contractors with a vast selection of building materials, home improvement products, lawn and garden supplies, and decor. The Home Depot also provides installation services for flooring, cabinets, countertops, HVAC systems, and windows, along with tool and equipment rentals. Its omnichannel strategy includes robust e-commerce platforms like homedepot.com, blinds.com, and thecompanystore.com, enhancing customer accessibility. As a leader in the consumer cyclical sector, The Home Depot benefits from strong brand recognition, extensive distribution networks, and a focus on professional customers, who drive higher sales volumes. With a market capitalization exceeding CHF 306 billion, the company remains a dominant force in the home improvement industry, supported by consistent revenue growth and operational efficiency.

Investment Summary

The Home Depot presents a compelling investment case due to its market leadership, strong financial performance, and resilient business model. With FY revenue of CHF 152.7 billion and net income of CHF 15.1 billion, the company demonstrates robust profitability, supported by a diluted EPS of CHF 15.11. Its operating cash flow of CHF 21.2 billion underscores financial stability, while a dividend per share of CHF 7.71504 appeals to income-focused investors. However, risks include exposure to cyclical housing markets, rising interest rates impacting discretionary spending, and intense competition from Lowe's and other retailers. The company's high total debt (CHF 52.2 billion) could also pose challenges in a tightening credit environment. Nonetheless, The Home Depot's scale, omnichannel capabilities, and focus on professional customers position it well for long-term growth.

Competitive Analysis

The Home Depot's competitive advantage lies in its unmatched scale, extensive store network, and strong brand equity. The company dominates the U.S. home improvement market, leveraging its vast product assortment, competitive pricing, and superior supply chain efficiency. Its focus on professional customers (Pros) differentiates it from competitors, as Pros account for a significant portion of revenue and tend to be more loyal. The Home Depot's investments in digital platforms and same-day delivery options enhance its omnichannel capabilities, catering to evolving consumer preferences. However, Lowe's remains a formidable competitor with a similar store footprint and aggressive pricing strategies. Smaller regional players and online-only retailers like Wayfair also pose threats in niche segments. The Home Depot's ability to maintain margins while expanding services (e.g., installation, rentals) strengthens its value proposition. Its vertical integration with suppliers and private-label brands further solidifies cost advantages. Nevertheless, macroeconomic headwinds and potential market saturation could pressure growth, requiring continued innovation and customer engagement.

Major Competitors

• Lowe's Companies, Inc. (LOW): Lowe's is The Home Depot's primary competitor, with a similar store count and product offering. While Lowe's has historically focused more on DIY customers, it has recently expanded its Pro services to compete directly. Strengths include a strong rural presence and competitive pricing. Weaknesses include lower brand loyalty among Pros and slightly weaker supply chain efficiency compared to The Home Depot.
• Wayfair Inc. (W): Wayfair is a leading online-only retailer specializing in home furnishings and decor. Its strengths lie in its vast digital selection and aggressive marketing. However, it lacks physical stores, which limits its ability to serve Pros and compete in bulky product categories like lumber and building materials. Wayfair also struggles with profitability due to high customer acquisition costs.
• Floor & Decor Holdings, Inc. (FND): Floor & Decor is a niche competitor focusing on hard-surface flooring. Its strengths include a specialized product range and competitive pricing for Pros. However, its smaller store footprint and limited product diversification make it less of a threat to The Home Depot's broader market dominance.
• Tractor Supply Company (TSCO): Tractor Supply competes in the lawn and garden segment, particularly in rural areas. Its strengths include a loyal customer base and unique product mix (e.g., livestock supplies). However, its limited overlap in home improvement categories reduces direct competition with The Home Depot.