Home Depot stock ( NYSE:HD ) has been one of the worst performers in the Dow Jones Industrials index so far in 2022, down almost 30%.
The home renovation business may be the epicenter of investor concern about a looming recession. Mortgage rates are rising, and demand may fall drastically, given how much money people have spent on mortgages in the last two years. Other industries, such as e-commerce and home furnishings, now suffer from a terrible growth hangover.
However, investing isn’t about concentrating on the next few quarters, which will be difficult for the home improvement giants. Let’s see whether investors can safely ignore the impending volatility while contemplating purchasing Home Depot stock ( NYSE:HD ) right now.
Home Depot Stock: Home Depot is a world-class corporation.
Home Depot has all of the characteristics of a company with significant, long-term competitive advantages. Its yearly sales have more than quadrupled since the previous housing market cyclical slump, rising to $151 billion last year from $66 billion in 2010. Home Depot gradually increased its market share in a growing sector during that period.
Financial figures are also remarkable. The company’s cash flow, return on invested capital, and profit growth are all excellent. Operating profit margins routinely outperform industry rivals.
That track record should be enough for investors to assume that, as it has in the past, Home Depot will almost surely emerge from any demand dip as a stronger corporation. However, there is one huge danger to that forecast.
A period of increasing interest rates
The issue is that a protracted period of high or increasing interest rates might...
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