Is Now the Time to Buy Home Depot Stock at Its Current Price?

Core Insights - Home Depot is facing a softer demand environment, particularly in discretionary and large-scale projects, despite easing interest and mortgage rates [1] - The recent stock price decline has led investors to question whether the current valuation is an attractive entry point or if holding the stock is a safer option [1] Stock Performance - Home Depot's shares closed at $351.13, reflecting a 16.9% decline over the past three months, compared to a 21.9% drop in the industry [2] - The stock is currently 17.7% below its 52-week high of $426.75 reached in September [2] - Home Depot has been trading below its 50-day simple moving average since October 1, indicating a loss of momentum [2] Competitor Analysis - Competitors like Lowe's and Floor & Decor have seen declines of 9.5% and 30.2%, respectively, while FGI Industries has surged by 117.2% during the same period [3] Valuation Insights - Home Depot's forward 12-month price-to-sales (P/S) multiple is 2.04, which is a premium compared to the industry average of 1.38 [4] - The stock is trading slightly below its 12-month median P/S of 2.24, suggesting it has not corrected sufficiently for a meaningful valuation cushion [4] Sales Performance - Home Depot's Q3 U.S. comparable sales rose only 0.1%, with October comps down 1.7%, indicating a lack of demand recovery [6] - The company anticipates slightly positive comparable sales growth for fiscal 2025, down from a previous forecast of 1% growth [9] Margin and Financial Performance - Operating margin decreased to 12.9% in Q3 from 13.5% a year earlier, with adjusted operating margin declining to 13.3% from 13.8% [11] - The Return on Invested Capital (ROIC) dropped to 26.3% from 31.5% over the trailing 12 months [12] - Total merchandise inventories increased to $26.2 billion, up by $2.3 billion from the previous year, leading to less efficient inventory turnover [12] Future Outlook - Home Depot's management has lowered growth expectations for its recently acquired SRS business due to a lack of storm activity, revising the outlook from mid-single-digit to low single-digit performance [10] - The company is enhancing its focus on professional contractors through AI-powered tools to improve project planning and execution [16][17] - Despite long-term growth strategies, the near-term outlook is challenged by softer demand and pressured margins, making the current risk-reward profile less compelling [18]