The Home Depot, Inc. (HD): A Highly Profitable and Fast Growing Home Improvement Retailer

What makes me interested in this company are its high insider ownership and the potential to grow. Its president and CEO, Robert Rucker, owns more than a 19.8% stake in the company. All insiders combined have around a 37% stake in the company they are managing. In the past 12 years, Tile Shop has managed to grow its store count from 14 to 68, and it expects to double the number of stores to 130-140 in the next several years.

Tile Shop is trading at around $25.50 per share, with the total market cap of around $1.35 billion. The market values Tile Shop at as high as 27.6 times EV/EBITDA, much higher than the valuation of both The Home Depot, Inc. (NYSE:HD) and Lowe’s Companies, Inc. (NYSE:LOW). The Home Depot, Inc. (NYSE:HD), at $75.10 per share, is worth around $109.7 billion on the market. It is valued much cheaper, at 12.35 times EV/EBITDA. Lowe’s is trading at $39.60 per share, with the total market cap of $43.1 billion. The market values Lowe’s Companies, Inc. (NYSE:LOW) the cheapest, at only 10.17 times EV/EBITDA.

My Foolish take

Income investors might favor The Home Depot, Inc. (NYSE:HD) with its decent dividend yield at 2%. While Lowe’s offers shareholders dividends with a lower yield at 1.5%, Tile Shop has not paid any dividends yet. Tile Shop, despite its high EV multiple, seems to be a good growth stock to invest in if investors would like to benefit from the housing boom, due to its rapid expansion plan, high comparable store sales growth, high adjusted EBITDA margin and high insider ownership.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Home Depot, Lowe’s, and Tile Shop Holdings. The Motley Fool owns shares of Tile Shop Holdings. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Highly Profitable and Fast Growing Home Improvement Retailer originally appeared on Fool.com is written by Anh HOANG.

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