LOW - Home Depot Acquires SRS For 6 Times What It Fetched In 2018 - Cause For Concern?
2024-03-29 10:00:56 ET
Summary
- The Home Depot yesterday announced it will acquire SRS Distribution in a $18.3 billion transaction - $15 billion more than what the business fetched only six years ago.
- In this update, I share my views on the acquisition of SRS from an operational and financial perspective.
- I also discuss the impact on The Home Depot's balance sheet, especially considering the ongoing and partly debt-funded share repurchases.
- I take a fresh look at the valuation of HD stock and share whether I have locked in gains after a 30% surge in just over four months.
Introduction
Shares of The Home Depot, Inc. (HD) - the world's largest home improvement retailer by net sales - have been on a spectacular bull run since bottoming in October 2023. I cover the company more or less regularly here on Seeking Alpha, most recently in November when I wrote my first bullish note on HD stock.
HD stock has gained more than 30% in just over four months (Figure 1), outperforming the AI-hype-driven S&P 500 by a whopping 14%. But don't get me wrong - even though I upgraded HD stock to "buy" in November, I was in no way expecting such a performance. I always remain humble, so the sharp rise in the share price makes me a little uneasy....
Home Depot Acquires SRS For 6 Times What It Fetched In 2018 - Cause For Concern?