Finance

An unstoppable stock that went from $1,000 to $32 million. Should you buy it now?


Investing in the stock market works best when people adopt a true long-term mindset.Measured in decades, not days or months, investors can take advantage of compound interest.

Historically, S&P 500 Index The average annual return is approximately 10%, of which dividendBut some businesses have completely destroyed this benefit.

In fact, $1,000 invested in one of the top retail stocks initial public offering The value in September 1981 (IPO) would be close to Today it’s worth $32 million. Let’s learn more about this company’s rise and whether it’s wise to buy these shares today.

Boring business; exciting rewards

Investors might be surprised to learn that the stock that generated such strong returns is exactly The Home Depot (NYSE:HD).The company sells home improvement products to DIY enthusiasts and professional customers through its store network.It is the industry leader, well ahead of smaller rivals Lowe’s.

Key to the stock’s impressive performance is its expanding store footprint. Today, the chain has 2,335 stores, the vast majority of which are located in the United States. The company says 90% of Americans live within 10 miles of a Home Depot.

Thirty years ago, there were only 264 stores. Seeing the potential for rapid expansion and replication of the business model, it’s no wonder leadership is actively investing in growth. Continued revenue and earnings growth helped drive the stock price higher.

HD Revenue (TTM) Chart

HD Revenue (TTM) Chart

HD Revenue (TTM) Data provided by Y chart

The retailer is incredibly profitable for its current size. Its net profit for fiscal 2023, which ended in January 2024, was $15 billion and operating cash flow was $21 billion, well above the figures during the IPO period.

And the executive team has demonstrated a priority on returning capital to shareholders. Home Depot paid out $16 billion in dividends over the past 24 months, and the stock currently yields about 2%. It has paid dividends for 148 consecutive quarters, helping to boost shareholder returns and push that $1,000 into millions.

Is Home Depot stock a buy now?

Owning Home Depot stock hasn’t been all that exciting lately. But the stock still delivered returns for investors. It has more than doubled over the past five years and nearly quintupled over the past decade (as of March 26). Those gains have outpaced the S&P 500.

Still, it’s prudent not to expect the stock’s future to resemble its past.The company has a large number of Market value 379 billion, with sales reaching $153 billion in fiscal 2023. Growth has slowed and will continue to do so.

The business is facing a slowdown as demand for renovation projects surged during the work-from-home period in the early days of the pandemic. Revenue fell 3% last fiscal year, and management expects it to grow 1% this fiscal year. Investors might be hesitant to pay a P/E of 25 for a business that isn’t currently growing.

But I still think now is a smart buying opportunity for long-term investors. Home Depot dominates the industry, has a strong brand, and has the resources to develop supply chain and omni-channel capabilities.

As a result, the company will continue to be second to none in serving its customers, which will help it continue to capture market share in the $950 billion home improvement industry, andOnce the economic headwinds subside, Home Depot should return to normal growth. Investors may be rewarded.

Should you invest $1,000 in Home Depot right now?

Before buying Home Depot stock, consider the following:

this Motley Fool Stock Advisor The analytics team has just identified what they believe is 10 Best Stocks Investors can buy now… and Home Depot isn’t one of them. The 10 stocks selected could generate huge returns in the coming years.

stock advisor Provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. stock advisor The service has more than tripled the S&P 500’s returns since 2002*.

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*Stock Advisor returns as of March 25, 2024

Neil Patel His client holds no position in any of the stocks mentioned. The Motley Fool has a position in Home Depot and recommends the stock. The Motley Fool recommends Lowe’s Companies. Motley Fool has disclosure policy.

An unstoppable stock that went from $1,000 to $32 million. Should you buy it now? Originally published by The Motley Fool



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