Is Home Depot Stock a Buy on the Dip? Expert Analysis and Key Points
The housing market is still under pressure, leading to lower interest in home improvement projects. However, Home Depot's model has a natural hedge because even in these times, people need to do small home improvement projects to fix up their older homes and make them livable or comfortable. The company has diversified its supplier base to boost its leverage and operates in a great industry with always a need for it.
Key Points:
- The housing market is still under pressure, leading to lower interest in home improvement projects.
- Home Depot's model has a natural hedge because people need to fix up their older homes.
- The company has diversified its supplier base to boost its leverage.
- Home Depot is a top value stock that pays an attractive dividend.
Strength under fire:
Mortgage rates are still high, and the real estate market is still stagnating. According to Redfin data, housing prices rose in May, while house sales tumbled 6% from last year. The national average 30-year fixed mortgage rate was 6.8%, slightly lower from last year, but still elevated. This is mostly detrimental to Home Depot's business, but the flip side is that if people remain in their older homes, they have no choice but to fix them up.
Leading with purpose:
In the 2025 fiscal first quarter (ended May 4), sales were up 9.4%, but comparable sales (comps) were roughly flat year over year. Earnings per share (EPS) declined from $3.63 last year to $3.45 this year, and the results were in line with expectations. For the full year, management is guiding for modest growth in sales and comps and a modest decrease in EPS. CEO Ted Decker noted that the company is well-prepared for whatever happens with tariffs and is continuing its efforts to diversify its supply chain.
Don't bet against the best:
Home Depot has a $1 trillion opportunity, which was recently expanded by acquiring pro supplier SRS Distribution. It opened 13 stores in Q1, which contributed to its excellent sales growth. Although it already has more than 2,300 stores in the U.S., Canada, and Mexico, it still has expansion opportunities.
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Final Thoughts:
Home Depot is a top value stock that pays an attractive dividend. At the current price, it trades at a price-to-earnings (P/E) ratio of 24, which isn't super cheap but is around recent averages. This is what the market thinks Home Depot is worth because it's reliable for strength and passive income, and it's likely to get back into growth mode under better circumstances. If you're looking for a top value stock to buy on the dip, Home Depot is an excellent option.
