Is The Home Depot Inc. a Buy-Low Opportunity or a Falling Knife?

The Home Depot Inc. (NYSE:HD) is an Atlanta-based home improvement specialty retailer. Home Depot stock has dropped 6% in 2018 and has fallen almost $30 from its all-time high of $207.60 reached in late January. Shares were battered by the broad market sell-off in late January and early February, and have no recovered since.

However, economic news remains very positive in the United States and Home Depot should capitalize on what is usually an uptick in home improvement spending in the spring and summer months. So should investors buy-low right now? Let’s take a look at its fourth quarter and full-year results for 2017.

Sales in 2017 rose 6.7% to $100.9 billion and comparable store sales rose 6.9% for the year. Home Depot also hiked its quarterly dividend by 15.7% to $1.03 per share representing a 2% dividend yield. In fiscal 2018 Home Depot will execute a share repurchase program of $4 billion as U.S. tax reform has seen stock buybacks surge. The company will also benefit from a projected tax rate of approximately 26% in 2018.

Up to fiscal 2020 Home Depot projects revenue in the $115 billion to $120 billion range and compounded annual sales growth between 4.5% and 6%. It expects capital spending to reach $2.5 billion in 2018. In spite of its recent dip, Home Depot stock is still up 20% year over year. The company should continue to benefit from solid economic conditions in the U.S. and will receive a boost from tax reform. Investors may want to consider re-entry before the spring and summer season kick off.