The Home Depot Financial Analysis

Introduction

The Home Depot is the company chosen to be the subject of the accounting term project. This company was chosen because it performed well in 2010, during the height of the crashing housing market. A major part of The Home Depot’s core business is catering to builders and the new construction market. Even though its core business suffered from the housing and mortgage industry problems, The Home Depot was able to post 23% returns this past year despite weaknesses in market condition.

The Home Depot is the world’s largest home improvement company and is the fourth largest retailer in the United States. The company was founded in 1978 and has grown to over 2,200 locations around the country, including Puerto Rico, the US Virgin Islands, China, Mexico, Canada and the territory of Guam.

The company is traded on the New York Stock Exchange and is included in the Dow Jones industrial average and Standard and Poor’s 500 index. The Home Depot’s current stock price is just over $37.00 per share with some analysts projecting future values to approach $45.00 per share. Overall, The Home Depot has proven itself to be a solid company with an impressive track record through one of the toughest times in the new home building business.

Another reason for selecting The Home Depot for the research project is that there should be an abundance of research and financial information available to assist with developing the project. The company has a substantial history of data available on the internet.

The following pages will outline, through the analysis of key financial ratios, the financial strengths and weaknesses of the company. In addition, the reader will gather clear evidence that The Home Depot would be an excellent investment decision.

Profitability

Return on shareholders’ equity (ROE) for The Home Depot was 17.67% for the FY2011 year-end reporting period. This represents a solid return for the company compared to the industry...