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Home Depot (HD) Gains As Market Dips: What You Should Know

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In the latest trading session, Home Depot (HD - Free Report) closed at $271.23, marking a +0.8% move from the previous day. This change outpaced the S&P 500's 0.66% loss on the day. Elsewhere, the Dow lost 0.29%, while the tech-heavy Nasdaq lost 1.25%.

Prior to today's trading, shares of the home-improvement retailer had gained 1.62% over the past month. This has outpaced the Retail-Wholesale sector's loss of 0.4% and lagged the S&P 500's gain of 3.42% in that time.

HD will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $2.57, up 12.72% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $30 billion, up 16.38% from the prior-year quarter.

HD's full-year Zacks Consensus Estimates are calling for earnings of $11.76 per share and revenue of $129.56 billion. These results would represent year-over-year changes of +14.73% and +17.54%, respectively.

Any recent changes to analyst estimates for HD should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. HD currently has a Zacks Rank of #3 (Hold).

Looking at its valuation, HD is holding a Forward P/E ratio of 22.89. Its industry sports an average Forward P/E of 14.96, so we one might conclude that HD is trading at a premium comparatively.

Investors should also note that HD has a PEG ratio of 2.09 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Building Products - Retail was holding an average PEG ratio of 1.14 at yesterday's closing price.

The Building Products - Retail industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 80, which puts it in the top 32% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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