It's similar to ROA, but measures earnings performance from the liabilities' side of the balance sheet. Adjustments to company assets will be needed to offset distortions from aging PP&E, and are found in the notes.Ī second workaround for low or negative equity companies is to use return on invested-capital (ROIC). We work around this by ignoring the leverage factor and focusing exclusively on return on assets (ROA). Since Home Depot's equity position has been low or negative in recent years, ROE calculations will yield nonsensical results. All figures are calculated on a square-foot basis to allow for an apples-to-apples comparisons across time and between other companies. The different colors are designed to match the colors you'll see in the charts below. If you're interested in a more detailed discussion about the breakdown, click on the link below where I walk through the term definitions and math. The equation below breaks down return-on-equity (ROE) for most brick and mortar retailer. We'll start with an introduction to the approach. ![]() The objective here is to explore big-picture business fundamentals since the exit of the founders. If you're looking for a quick prediction for the next quarter, this isn't the read for you. ![]() This article is designed to prepare you for that possibility by analyzing company's economics over the past 2 decades. I see Home Depot as a hold at current prices, but believe the company could be a buy if the market overreacts too negatively to normalizing DIY demand. During a tough two decades for brick and mortar retailers, the company has successfully defended its brand in a new age of digital retail. Since the exiting of the founders in the early 2000s, The Home Depot ( NYSE: HD) has built themselves into an American retail behemoth. Lokibaho/iStock Unreleased via Getty Images
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