fin 460 financial modeling

Determine the intrinsic value per share for Home Depot at the end of the fiscal year using a “two-stage” model (use the following information to construct the model):

1. Assume D0 is current annual dividend per share listed in Bloomberg or from a different free source form the web.

  1. Assume that in “first stage” (lasting 5 years), HD’s dividend per share grows by the “Next 5 years” growth estimate . (Be prepared to justify how would you choose this growth rate…..)
  2. Assume that HD’s dividend per share is expected to grow by x% per year = Mean Growth rate forever AFTER the five-year “first stage” growth is completed.
  3. Calculate HD’s cost of equity. Compare it to the cost of equity from Bloomberg or from a different provider you found online. Attach the report you used.

Show formulas, calculations and interpretation. Have a nice table with your assumptions (CAGR using historical growth rates, independent analysts’ estimates, management guidance, most recent growth rate etc- like we did in class). Submit it in electronic format attaching screenshots from Bloomberg screens or from a stick research report where you got the data from.

  1. Build a table and a chart with the main operating segments for the most recent past year with the following columns: Revenues, % of each segment in Total Revenues, Operating Income, % of each segment in Total Operating Income
  2. Build a graph with the dividend annual growth rates since 2005 to the present.Add the EPS growth rates to the same chart for the same period of time.
  3. What is Home Depot’s stock intrinsic value using the Gordon constant growth model?
  4. What is Home Depot’s stock intrinsic value using a 2 stage growth model? How accurately does the model above value a share of HD stock?
  5. What was the closing price at the end of the trade day on March 13, 2020?
  6. What was the closing price at the end of the fiscal year? Attach a chart with daily stock price performance for the past 12 months. On the same chart add the quarterly EPS.
  7. What are the possible problems with the models? Please comment on the strengths and weaknesses of each valuation approach.
  8. Did you encounter any difficulties or challenges?
  9. Take screenshots of the data you used and attach them next to your calculations.
  10. Would you buy/sell/hold this stock? Why? Why not? Do you trust your results? Why ? Why not?
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