The Home Depot, Inc. (HD): Here’s What to Look For in The Upcoming Earnings Report

Home Depot carries a price-to-earnings ratio of 24.45, which, when compared with Wal-Mart Stores, Inc. (NYSE:WMT)‘s 15.75 and Target Corporation (NYSE:TGT)’s 15.6, is rather high. While all three of these companies are giants in retail and are planning on opening new locations, Home Depot’s stock has been pushed higher because investors believe the recovery of the housing market will help boost sales, which is understandable when we look at the company’s past performance when we had a strong housing market.

For full-year 2006, The Home Depot, Inc. (NYSE:HD) had 2,100 stores worldwide but still managed to bring in $79 billion in annual sales. At the end of the company’s fiscal 2012, the company had 2,256 stores worldwide, yet it only produced revenue of $74.8 billion. That revenue began falling in 2007 with the start of the financial and housing crisis, though it still managed to come in at $77.3 billion for that year, with 2,196 stores.

Based on those statistics, it’s easy to see why many investors believe Home Depot will grow revenue and, more importantly, earnings in the coming years, which also explains why the stock has risen so dramatically both last year and thus far in 2013. While the Dow Jones Industrial Average (Dow Jones Indices:.DJI) gained 7.25% in 2012 and has risen 11.64% in 2013, shares of Home Depot rose by 46.7% last year and are already up 18.59% year to date. But while Home Depot’s stock performance has largely been attributed to the housing recovery, investors want to remain focused on earnings and how the company’s metrics compare with past quarters. If the company’s fundamentals begin to deteriorate, regardless of whether the housing market recovers, the stock is likely to experience poor performance.

The article A Few Things to Look For in Home Depot’s Upcoming Earnings Report originally appeared on Fool.com and is written by Matt Thalman.

Fool contributor Matt Thalman has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Lowe’s.

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