Home Depot Valuation

Home lay in Valuation Analysis The classify calculated a per share valuation of $42.21 for Home funds stock. This needed certain self-reliances regarding various egression valuates, and found upon a sensitiveness analysis, a declining gross revenue developing deem is anticipated up to 2011. By this point Home entrepots hive away expansion program ordain slow down, if non break off all to landher, over callable to market saturation. The inclusion of a maximum constant gross sales growth rate of 5% seemed to be a grievous benchmark for Home Depot. While this is a bit aggressive, we feel that as expansion wanes same hold onhouse sales leave increase marginally from the projected 3.5% growth primarily due to the strength of the brand. As the new store openings will gravel to wind down, 2006s projected ROIC of 25% is expected to aggravate steadily until reaching approximately 16% by 2011. We alike assumed that the WACC would be stable at 10% since we did not foresee any material changes in the capital structure. We withal believe the explicit period should be greater than 5 years, but due to the lack of concrete information, we decided not to forecast past 5 years. This assertion has most apparent reduced our estimated valuation by neglecting most years with potency growth rates of more than 5%.

However, in the long run we felt that the amount would give birth an orthogonal affect on our findings. Arguably the most significant assumption in this calculation is the sales growth rate associated with the death value. Since this number is the pr esent value of perpetuity it represents the ! largest voice of our innocent(p) cash flow. As mentioned earlier, we feel that Home Depots expansion will be at an suppress or close to it by 2011, and any continued growth beyond that date will most likely be fuel by existing store sales. Same store sales have been declining recently due to cannibalization from newly unfastened locations (5.4% in FY ending in 2005 to an est. 3.5% in FY ending in 2006, interpreted from latest 10-Q). As the expansion efforts wane,...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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