Home Depot Financial Statements and Financial Ratios Analyzed

Home Depot: Brief Summary

Home Depot has its headquarters in Atlanta, Georgia.  The company competes in the consumer cyclical sector specifically in the home improvement retail industry.  At present, the organization employs approximately 400,000 individuals.  Home Depot generates most of the revenues from selling retail home improvement products to consumers and businesses.  Popular home improvement items sold may include building materials, lawn and garden products, and other do-it-yourself supplies.

From a financial perspective, Home Depot has a market capitalization of approximately $285 billion.  Their beta is 1.06.  This indicates that Home Depot is slightly more risky of an investment as compared to the overall market.  The company does pay dividends.  At present, Home Depot’s dividend yield is approximately 2.26%.  The organization 52-week stock range has fluctuated between $140.63 to $267.80.

Home Depot Financial Report Sources

“Home Depot 2019 Company Analysis… For Beginners: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan.  In this report, I used Home Depot 2018 10k, 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and 2019 10k annual report as the basis for information gathering. 

Section 1: Home Depot Income Statement Analyzed

In this section, I walk through a broad definition as to what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Home Depot's important income statement line item trends from 2015 to 2019, in most cases.

Home Depot Revenue Growth.

In 2015, Home Depot’s revenues were approximately $83.1 billion.  In the next four years, the organization would continually grow the revenues ending 2019 with approximately $108 billion in revenues.  Common sense would dictate that this type of trend should be commonplace with multinational organizations.  However, this cannot be further from the truth.  With this said, if the organization is able to continue their impressive 6.8% revenue growth annually, then the company should be well suited for long-term prosperity.

Home Depot Income Statement 2019
Column1	2019	2018	2017	2016	2015
Revenues	108,203	100,904	94,595	88,519	83,176
COGS	71,043	66,548	62,282	58,254	54,787
Gross Profit	37,160	34,356	32,313	30,265	28,389
SG&A	18,513	17,864	17,132	16,801	16,280
Depreciation	1,870	1,811	1,754	1,690	1,640
R & D	-	-	-
Other
Operating Expenses	21,630	19,675	18,886	18,491	17,920
EBIT	15,530	14,681	13,427	11,774	10,469
Other Income
Interest Expense	1,051	1,057	972	919	830
EBT	14,556	13,698	12,491	11,021	9,976
Taxes	3,435	5,068	4,534	4,012	3,631
Net Income	11,121	8,630	7,957	7,009	6,345

Section 2: Home Depot Balance Sheet Analyzed

For the Home Depot balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define their balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019.  Next, I then offer a summary analysis of their important balance sheet line items.

Home Depot Accounts Receivable.

In 2015, Home Depot had an Accounts Receivable of approximately $1.4 billion.  In my opinion, their Accounts Receivable is probably funds waiting to be paid by commercial accounts.  In the next two years, the organization would increase its Accounts Receivable ending 2017 with approximately $2 billion.  In the next two years, their Accounts Receivable would slightly fall ending 2015 with $1.9 billion.  The leveling off of Accounts Receivable indicates that the company may be dealing less with or at least not growing their commercial accounts as much as they are with their retail sales.  For investors, if this segment of the organization starts to decline, then total revenues meet not be far off.

Home Depot Summary Balance Sheet 2019
Column1	2019	2018	2017	2016	2015
Cash	1,778	3,595	2,538	2,216	1,723
Short Term Investment
Account Receivable	1,936	1,952	2,029	1,890	1,484
Inventory	13,925	12,748	12,549	11,809	11,079
Other
Current Assets	18,529	18,933	17,724	16,484	1,016
Net PPE	22,375	22,075	21,914	22,191	22,720
Goodwill	2,252	2,275	2,093	2,102	1,353
Other
Total Assets	44,003	44,529	42,966	41,973	39,946
Accounts Payable	7,755	7,244	7,000	6,565	5,807
Accrued Expense	1,506	1,640	1,484	1,515	1,391
Accrued Taxes	11	54	25	34	35
Notes Payable	1,339	1,559	710	350	290
LT Debt - Current	1,056	1,202	542	77	38
Other
Total Current Liabilities	16,716	16,194	14,133	12,524	11,269
LT Debt	26,807	24,267	22,349	20,789	1,844
Other
Total Liabilities	45,881	43,075	38,633	35,657	30,924
Common Stock	10,578	10,192	9,787	9,347	8,885
Treasury	58,196	48,196	40,194	33,194	26,194
Retained Earnings	46,423	39,935	35,519	30,973	26,995
Other
Total Equity	(1,878)	1,454	4,333	6,316	9,322
Total Equity & Liability	44,003	44,529	42,966	41,973	39,946

Section 3: Home Depot Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Home Depot from 2015 to 2019.  In reviewing each of their financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of their important Financial ratios. 

Home Depot Current Ratio.

Home Depot’s current ratio ended 2015 at 1.36.  In the next four years, the organization would continuously reduce its current ratio ending 2019 at 1.11.  Because the organization does receive significant cash influx on a daily basis, having a current ratio at .8 or .9 may indicate optimal usage of short-term assets.  From this lens, investors may consider a 1.11 current ratio as not optimal.

Home Depot Total Asset Turnover.

Home Depot had a total asset turnover in 2015 of 2.08.  In the next four years, the organization would increase its total asset turnover in 2019 at 2.46.  This indicates that the company is continually finding ways to improve or rather make money on its assets.  As with other segments of their financials, Home Depot seems to be doing an excellent job with this ratio.

Home Depot Return on Assets.

Home Depot had a return on assets of 15.88% in 2015.  In the next four years, the organization would increase its return on assets to 25.27% in 2019.  The above-average growth and return on assets is a similar trend as other ratios for the organization.  Just another reason why this organization may be an advisable investment.

Home Depot Debt ratio.

Home Depot ended 2015 with a debt ratio of 4.62%.  For a multinational organization, this debt ratio is significantly low.  When an organization has such a low debt ratio, the firm is missing out on tax write off opportunities as well as making money on borrowed money.  In the next four years, the company would increase its debt ratio substantially ending 2019 at 60.92%.  It seems like the organization went from one extreme to another.