Home Depot's Stock Leads Retail Higher

The Home Depot, Inc. HD shares have established themselves as true market leaders in not only the retail space, but also the broader market.

The stock has moved from a February low of just under $75 to a highs this week just over $96. The stock did crater during the most recent sell-off, but managed to hold up above $86.35 horizontal line support. The rally since that low two weeks ago has certainly been indicative of a market leader.

Do the fundamentals of Home Depot justify the lofty stock price? Let's take a look.

What The Bulls See

• A likely candidate to continue to benefit from a muted interest rate environment.
• A nice dividend of 2 percent.
• A current ratio of 1.44.
• Net profit margins of more than 7 percent, which spin-off positive levered free cash flow of $6.53 billion annually.
• Some cheap valuation metrics: An enterprise value of $140 billion versus a market capitalization of only $129.2 billion and a price-to-sales of 1.59.

Related Link: Wal-Mart In Technical No Man's Land As It Awaits Fundamental Catalysts

What The Bears See

• Some rich valuation metrics: A P/E of just over 18 versus estimated 2015 growth rates in revenues and EPS of 4.4 percent and 18.8 percent, respectively, and a price-to-book ratio of 11.22
• A debt-to-equity ratio of 146.08 percent.

The Technical Take

Technicians note that HD shares have broken out to the upside recently and have nothing stopping them from moving up to the upper edge of the long-term uptrend channel at around $105-$110, except maybe an overbought condition. Those looking to get long of shares will be targeting entries near one of two Fibonacci retracements (of the most recent upswing) at $94.01 or $91.88. Technicians caution against shorting a stock breaking out to new highs.

The macro-economic fundamental outlook appears favorable for Home Depot to continue its current growth trajectory. However, if the Federal Reserve decides to take away the punch bowl, that upward trajectory being enjoyed by Home Depot shareholders could change quickly.