Benefit Line Submitting, October 2002
Valuation and Evaluation of House Depot Incorporation.
Gracie Quintana Jeff Callier Christine Kyrish Steven Poon
December 6th, 2004
Table of Contents
Economic Data Overview I. Overview of Valuation II. Business Brief summary Products and Services Opponents Industry Research Competitive Strategy III. Accounting Analysis Accounting Policies Degree of Accounting Versatility Accounting Strategy Quality of Disclosure Quantitative Analysis Warning flags IV. Percentage Analysis and Forecasts Percentage Analysis Section Financial Declaration Forecasting Methodology Conclusion Versus. Valuation Expense of Capital Way of Comparables
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Cheaper Dividends Discounted Free Cash Flows Cheaper Residual Income Long term Average Revenue Abnormal Profits Growth Altman's Z-score Outcomes VI. Analyst Recommendation VII. References VIII. Appendix Sector Graphs Proportion Analysis Rival Annual Financial records Quarterly Financial records and Forecasts Annual Financial records and Forecasts Calculations found in Valuations Method of Comparables Value Discounted Free of charge Cash Flow and Sensitivity Analysis Valuation Discounted Dividends and Sensitivity Research Valuation Revenue and Sensitivity Analysis Value Abnormal Earnings Growth and Sensitivity Examination Valuation
thirty seven 38 39 39 forty five 41 41 42 43 44 forty-four 45 forty seven 49 52 55 56 57 58 59 62
Investment suggestion: Home Depot is a little bit overvalued for that reason we advise it like a hold. The stock can be poised to do at least as well as the industry.
Home Depot is supposed to penetrate foreign markets; this kind of growth chance will increase market share and the final conclusion. Uncertainty in the economy affects Residence Depot's product sales, as it operates in a cyclical industry. This uncertainty will not have a detrimental impact on the long term regarding Home Website and its subsidiaries.
I. Overview of Valuation Business and Industry Overview The Home Depot, Inc. is a world's greatest home improvement merchant and the second largest dealer in the United States, making $64. almost eight billion in revenues through the 2003 fiscal year. Functioning under the expense leader approach Home Depot derives the key
success factors based on a tight-cost control system, stableness of sourcing channels, and a growth strategy based on primary competencies. Residence Depot's growth strategy enables further industry penetration by simply enhancing a worth chain of lower priced high grade products and the expansion of new store platforms to support growing market developments. The powerful integration of distribution centers that lower transaction costs, an expansive product selection through distinctive and proprietary agreements, as well as the initiation of your quality assurance plan positioned Home Depot to earn regular above-average earnings within a highly fragmented selling (home improvement) industry. Accounting Analysis The accounting policies adopted by Home Website prove to be in line with it's business strategy. General, the Home Depot is very forthcoming using their accounting techniques and procedures. The particularly identify three major regions of accounting coverage in regards to their specific industry to further their business strategy as it relates to merchandise inventories, self insurance and income recognition. The firm can be proactive in divulging accounting policy with regards to each of these areas. They particularly address the firm's actions in regards to needed GAAP alterations and liberally discuss their very own adoption of certain GAAP in their monetary reporting including their plan regarding the upcoming change in plan for the firm in their treatment of operational leases as opposed to capital leases. The firm goes so far as to prediction how the enhancements made on policy will certainly affect upcoming financial claims in 2005 the records to their 2003 financial papers. Ratio Examination Computation in the ratios highly relevant to the home improvement retail industry shows not any significant complications for Home Lager....