Home Depot (HD)

Heres a company I like and looks like a bargain as of 11.26.06

Company Description

The Home Depot, Inc. operates as a home improvement retailer in the United States, Canada, and Mexico. The company operates The Home Depot Stores that offer an assortment of merchandise and services, including building materials, lumber and millwork, plumbing, electrical and kitchen, hardware and seasonal, paint, flooring and wall covering products, generators, and furnace and central air systems, as well as provides installation services, such as carpeting, flooring, cabinets, countertops, and water heaters. It serves Do-It-Yourself (DIY) customers; Do-It-For-Me (DIFM) customers; and professional customers, including remodelers, general contractors, repairmen, and tradesmen. The Home Depot also operates EXPO Design Center stores, which provides home decorating, remodeling, and installation services for middle-to upper-income DIFM customers. It offers interior design products for kitchens, baths, appliances, and flooring, as well as products for lighting, decorating, and storage and organization projects. In addition, the company provides credit purchase programs through third-party credit providers to professional, DIY, and DIFM customers. As of September 18, 2006, the company operated approximately 2,000 stores. It also offers products through its Web site, www.homedepot.com. The company operates AmerenUE&undefined;s Labadie power plant for concrete packaging through the partnership with AmerenUE and Charah, Inc. The Home Depot was founded by Bernie Marcus and Arthur Blank in 1978. The company is based in Atlanta, Georgia

Thoughts

The stock currently trades at $37 with a P/E of 12. Its historical P/E range is between a high of 57 in 1999 to today&undefined;s low of 12.For the past couple of years it has ranged between a more moderate 12-18. P/E wise it definately looks like a bargain.

P/BV- The stock traded at 10x book value in 2000 and currently trades at roughly 3x book value making it a bargain in P/BV

What I love about the company is its financial position and industry position. Currently it has more than 3 billion of free cash flow. I like companies with free cash flow because they are able to capitalize on oppurturnities that more cash strapped companies can&undefined;t. the biggest oppurturnity out there is the China boom in which Home Depot is well positioned to pounce on. Home Depot has been able to maintain good ROE (roughly 20%)and ROA (13%). The company is still gorwing at around 10% and should be able to continue at that pace if it expands into China and other emergin markets. The stock has been beaten up due to mangements use of optons and slow down in housing. The slow down in housing has affected in company connected to housing in which Home Depot is clearly connected with. As housing rebounds so will Home Depot so a little patience is requiered if you do plan to have a position with HD. I like to play for 3-infinity years. As long as I do not see any drastic changes in the fundamentals I might hold HD for a long time.

Disclaimer: I own HD shares