Download - Home Depot: An Owners Manual for Investors
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Home DepotAn Owner's Manual for Investors
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you're entitled to a share of its earnings.
As an owner of Home Depot's stock
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NOT TO SCALE
obviously
$7
Billion
Home Depot's
12-Month
Earnings
Home Depot's
Earnings
per share
$5.34
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If you divide Home Depot's share
price by its earnings per share (EPS),
you get its price-to-earnings ratio.
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P/E
Ratio=
Share Price
EPS25.10=
$133.97
$5.34=
This is how much it costs to buy $1
of Home Depot's annual earnings.
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A higher P/E ratio implies a lower
potential return.
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1
10
100
1,000
100 Biggest S&P Companies
P/E
Rati
o
Most companies have P/E ratios
between 12 and 30
What is a Typical Stock's P/E Ratio?
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You can also use Home Depot's P/E
ratio to derive its earnings yield.
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1
25.10 4.0%
Home
Depot's
Earnings
Yield
1
P/E Ratio= ==
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This helps you compare a stock
to other types of investments,
such as bonds and real estate.
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3.98%
6.63%
4.33%
2.90%2.45%2.21%
Home
Depot's
Earnings
Yield
Class A
Office
Building
Cap Rate
S&P 500
Earnings
Yield
10-Year
AAA Corp.
Bonds
5-Year
CDs
10-Year
Treasuries
Average Rates of Return
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Of course, if you own one share of
Home Depot stock, you don't get a
check each year for its EPS.
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You receive quarterly dividends
instead, which typically account
for only a portion of total earnings.
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42%
Home Depot's Payout RatioThe payout ratio is the percent of earnings
paid as dividends. Anywhere from 30% to
70% is normal.
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1.76%Home Depot's Dividend Yield
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Home
Depot's
Dividend
Yield
=
Dividend
per Share
Share
Price
=$2.36
$133.97= 1.76%
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You can then use this to compare
stocks based on their income-
generating potential.
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1.76%
3.57%3.33%
2.72%
1.64%
0.71%
Home
Depot
Exxon Walmart Wells
Fargo
Comcast Visa
Representative Dividend Yields
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Home Depot also buys back its own stock.
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This reduces its share count, which
increases the ownership interest
of each remaining share.
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$6.3
Billion
-5.8%
Home Depot's
Buybacks
(TTM)
Change in
Home Depot's
Share Count
(TTM)
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Home Depot's stock?So, what does the future hold for
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Home
Depot
307%
S&P 500
119%
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
Today20132011200920072005
If the Past is Prologue...Total return since Jan. 1, 2005
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Home Depot's earnings to grow.
While it's impossible to predict the
future with precision, analysts expect
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$5.33
$6.14
Current Fiscal Year Next Fiscal Year
Average Earnings per Share Estimate Among Wall
Street Analysts
Divining Home Depot's Future
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