Home Depot's Sluggish Sales Growth May Be Temporary

Home Depot's recent earnings report has left investors wondering whether the company's sluggish sales growth is a sign of broader economic issues or specific challenges. However, Lawrence Rothman, CFA believes that it's the former, and the shares look attractive to patients investors.

The company reported fiscal second-quarter results for the period ending August 2, with same-store sales growing 1.7%, including 1.3% in the US. Management doesn't expect acceleration this year, with guidance calling for flat to a 2% increase in comps.

Despite sluggish sales growth, earnings per diluted share increased 5.1% year over year to $4.92. When sales growth improves, the bottom line is expected to grow at a faster pace. Home Depot's largest home-improvement retailer offering convenience and low prices makes it likely that people will shop there when they do take on major projects and renovations.

Rothman sees the stock's upside and 2.9% dividend yield, which is higher than the S&P 500's 1.1%, as attractive for investors seeking total return potential. With Home Depot being a Dow Dividend Stock, its appeal to income-focused investors remains strong.