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HD, a 16% higher target price
Current 411 Target 478 +16%
December 30th 2021
1 minute read
Sales declined seasonally -10%
Costs flat, profit down on higher non cash costs
Cashflow lower on working capital
Balance sheet higher leverage
Valuation, revised up to a 16% higher target price
1 minute read
Sales declined seasonally -10%
- Sales declined seasonally -10% in the third quarter to 36,820 million dollars vs our 36,595 million dollars forecast.
- This brings the quarterly average to 3% growth.
- We predict average growth of 3% in this next 12 months to bring sales to 40,605 million dollars in the third quarter of 2022.
Costs flat, profit down on higher non cash costs
- The cash cost ratio went from -86% to -87% profit from 4,807 to 4,129 million dollars in the third quarter from higher non cash costs.
- The average cost ratio is at -87% now.
- We use the latest -87% cost ratio to predict a higher 4,385 million dollars profit in the third quarter of 2022.
Cashflow lower on working capital
- Free cashflow went from 3,116 to 2,744 million dollars in the third quarter with -695 million dollars investment Cashflow & negative working capital.
- Average quarterly Cashflow is at 3,028 million dollars now.
- We assume -695 million dollars investment spending which with higher sales, flat working capital gives a higher 4,531 million dollars Cashflow in the third quarter of 2022.
Balance sheet higher leverage
- Cash increased 4,566 to 5,067 million dollars in the third quarter.
- Liabilities increased 68,700 to 71,996 million dollars so net cash worsened -64,134 to -66,929 million dollars.
- With our forecast cashflow & a -13,355 million dollars equity payout -12,649 million dollars liabilities payment net cash will be -54,280 million dollars in 12 months time.
Valuation, revised up to a 16% higher target price
- HD capital from the last 19 quarters improved 46,905 to 49,180 million dollars in the third quarter with 2,909 million dollars new liabilities, a -5,184 million dollars equity payout & will be higher 67,000 million dollars in12 months time.
- At the current market value of 429,000 million dollars based on our forecasts it’s at 5.92 X assets with a 3.8 years payback & a 1.2% yield.
- Our cashflow forecast is 17,820 million dollars which means an 24 X valuation. A 28 X valuation gives a 16% higher target price of 478 dollars.