home depot company analysis
DESCRIPTION
Home Depot Company Analysis Accounting ClassTRANSCRIPT
Analyst TeamChristina CaamanoEric SchaferSusan Tatara
Home Depot Described
Past Performance
Future Performance
Investment Recommendation
World’s largest home improvement retailer 2,200 stores located in the U.S, Mexico,
China, Puerto Rico, Canada, Guam and the Virgin Islands
Sells building materials, home improvement, lawn/garden products and a variety of services.
Do-it-yourself Do-it-for-me Professional customers
Net earnings was $2.3 Billion Diluted earnings per share:$1.34 Net sales: $71.3 Billion Operating income: $4.4 Billion Gross Profit: 24.0 Billion
Merchandise Inventories asset: Remained at similar level for 2 years Largest asset (inventory driven company)
We expect this number will decrease by a small amount in fiscal year 2009….
Buildings asset:Increased by 4%
Home Depot purchased more buildings in fiscal year 2008
Home Depot could place properties on market as a “sale lease back”.
This would result in added value and increased revenue.
Furniture fixtures and equipment asset Construction in progress asset Short term debt liability Current installments of long term debt liability Total liabilities
LIQUIDITY:2008 2007 Industry Lowe’s
Current Ratio 1.20 1.15 1.20 1.15
Quick Ratio 0.13 0.14 0.10 0.08
Cash debt 0.46 0.45 NA 0.52
ACTIVITY:2008 2007 Industry Lowe’s
AR T/O 63.91 34.52 63.90 0.00
Inventory T/O 4.22 4.18 4.20 4.01
Asset T/O 1.13 1.10 4.96 1.50
PROFITABILITY:2008 2007 Industry Lowe’s
Profit Margin 0.03 0.06 NA 0.05
RR on assets 0.04 0.06 6.37 0.07
EPS 1.34 2.38 NA 1.51
COVERAGE:2008 2007 Industry Lowe’s
Debt to Asset 0.57 0.60 0.58 0.45
Time Interest 6.99 10.41 NA 13.52
Cash debt 0.22 0.14 NA 0.28
Liquidity: Cash flow from operations Net cash in financing activities
Current cash debt coverage ratio decreased a bit in 2008 fiscal year from
0.46 to 0.45
Net cash Leases Commercial paper programs Stock repurchase program
Write offs Rationalization charges Current economic conditions and relationship
to decline in sales…
Compensation discussion and analysis
Off balance sheet arrangements
FIFO Method In Canada a weighted average inventory
system was utilized in 2008
In Fiscal Year 2008, inventory was reduced while maintaining a favorable in-stock rate
Change in top level management
Non GAAP results Discontinued operations Revenue recognition
HOLD – if you currently own this stock
BUY - good investment opportunity
Home Depot is financially sound and will survive the economic downturn…
Questions