A Buyout of Home Depot

It’s official. Private equity has officially gone bonkers.
The big news today is that some investors are interested in buying Home Depot (HD).
That’s right, Home Freakin Depot. Private investors are thinking of buying a Dow component. Dear lord! And it’s one of the real ones, not Alcoa.
In my mind, Home Depot is still cheap. The earnings have been disappointing, but nothing horrible. HD is going to make about $6 billion this year. It pays a good dividend (raised by 50% twice this year), and the company is working to alter its business model.
The question we have to ask is if HD can change from a company that grew 18% a year to a company that will grow by 10%-12% a year. I think Nardelli realizes the problems HD faces.
The Home Depot expects 12% sales growth next year, and EPS growth of 4%-5%. But then what?

Posted by on December 1st, 2006 at 10:14 am


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