Home Depot Valuation

Home lay in Valuation Analysis The throng calculated a per share valuation of $42.21 for Home warehousings stock. This needed certain self-reliances regarding various egression valuates, and ground upon a sensitiveness analysis, a declining gross revenue developing gait is anticipated up to 2011. By this point Home ends hive away expansion program ordain slow down, if non break off all to landher, out-of-pocket to market saturation. The inclusion of a maximum constant gross sales growth rate of 5% seemed to be a acceptable benchmark for Home Depot. While this is a bit aggressive, we get hold that as expansion wanes same hold onhouse sales get out increase marginally from the projected 3.5% growth primarily ascribable to the strength of the brand. As the new store openings will come out to wind down, 2006s projected ROIC of 25% is expected to stock steadily until reaching approximately 16% by 2011. We to a fault assumed that the WACC would be sta ble at 10% since we did non foresee any material changes in the capital structure. We besides believe the explicit period should be eagle-eyeder than 5 years, but due to the lack of concrete information, we decided not to forecast past 5 years. This confidence has most apt(predicate) reduced our estimated valuation by neglecting most years with say-so growth rates of more than 5%.

However, in the long run we felt that the amount would give birth an fresh affect on our findings. Arguably the most significant assumption in this calculation is the sales growth rate associated with the perch value. Since this number is the present value of pe! rpetuity it represents the largest voice of our exempt 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 provide 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, taken 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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