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

Page 1 of 2

The housing recovery is now on the way. According to S&P/Case-Shiller Home Price Indices, all three composites, including the National Index and the 10- and 20-City Composites, experienced double-digit annual growth, which were the highest annual returns since 2006. Investors might wonder what stock to buy to surf the increasing trend of the housing boom.

Recently, two Fool analysts, David Meier and John Reeves, recommended one stock that they thought would be a good candidate for the upward housing trend. It is Tile Shop Hldgs, Inc. (NASDAQ:TTS). Since the beginning of the year, Tile Shop has risen as much as 50% on the market. Is Tile Shop a good buy now? Let’s find out.

The highest comparable store sales growth

Tile Shop Hldgs, Inc. (NASDAQ:TTS) is considered a specialty retailer of more than 4,500 ceramic, porcelain and stainless steel manufactured tiles products, operating around 70 stores in 22 states in the U.S. Its typical store has around 23,000 square feet, with substantial portions of retail store space dedicating to showrooms, including samples of its products and more than 60 various bathroom, kitchens vignettes. Most of its revenue, around 53% of the total 2012 revenue, was from stone products. Ceramic products ranked second, accounting for 30% of the total sales while 17% of the total sales were setting and maintenance products.

The Home Depot, Inc. (NYSE:HD)

What makes me interested is its consistently high same stores sales growth in the past three years. In 2012, its same store sales increased by as much as 7.1% with an operating margin of 18.8%. Its same store sales growth was much higher than its peers, including The Home Depot, Inc. (NYSE:HD) and Lowe’s Companies, Inc. (NYSE:LOW). The Home Depot, Inc. (NYSE:HD) experienced an around 4.6% increase in its comparable store sales while Lowe’s had the lowest comparable sales growth, at only 1.4%. However, Tile Shop Hldgs, Inc. (NASDAQ:TTS) produced a loss of more than $46.8 million in 2012 compared to the consistent positive profit in the period of 2008-2011. The loss in 2012 was due to $82 million in the change in value of warrants.

… And most profitable with high insider ownership

According to those two Fool analysts, they were excited about Tile Shop because of its potential to increase its store base significantly, the high profitability and the company’s competitive advantage. In 2012, Tile Shop generated around $50.6 million in its adjusted EBITDA with an adjusted EBITDA margin of 27.7%. Tile Shop seems to be the most profitable with the highest adjusted EBITDA margin. While The Home Depot, Inc. (NYSE:HD) delivered only 12.6% in its adjusted EBITDA margin, the adjusted EBITDA margin of Lowe’s was the lowest of the three, at only 10.4%.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!