The Dow Jones Industrial Average (DJIA) fell 200 points last Friday, registering its fifth straight week of losses. Investors' concerns over escalating tension between Russia and Ukraine have primarily led to the correction of the index over this period. The rising oil and gas prices, the upcoming interest rate hikes, and rising supply chain disruptions could lead to a further downtrend for DJIA in the coming days.
While several DJIA stocks are currently trading at attractive valuations considering their long-term growth prospects, many still look expensive. Since the index could lose further value in the near term, it could be wise to avoid stocks that still look overvalued.
Despite possessing poor growth prospects and losing more than 10% year-to-date, DJIA stocks The Home Depot, Inc. (HD), The Walt Disney Company (DIS), and NIKE, Inc. (NKE) are trading at premiums to their peers. So these stocks are best avoided now.
The Home Depot, Inc. (HD)
HD functions as a home improvement retailer and operates the Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products, and provide installation, home maintenance, and professional service programs to do-it-yourself and professional customers.
The operating expenses of HD increased 4.3% year-over-year to $7.04 billion in the fourth quarter ended January 30, 2022. Its cash and cash equivalent stood at $2.34 billion, while its net cash used in financing activities increased 541%% year over year to $19.12 billion.
Analysts expect HD's revenue to decrease 2.7% year-over-year to $36.49 billion for the first quarter ending April 2022, while its EPS is expected to decrease 4.7% year-over-year to $3.68 in the first quarter. The stock has declined 23.7% year-to-date.
In terms of forward non-GAAP P/E, HD is currently trading at 19.61x, which is 56.6% higher than the 12.52x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 2.15x, which is 137.4% higher than the 0.91x industry average.
HD's POWR ratings are consistent with this bleak outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HD has rated a D grade for Value. Within the C-rated Home Improvement & Goods industry, it is ranked #28 of 65 stocks.
To see additional POWR Ratings for Growth, Quality, Stability, and Momentum for CVX, click here.
The Walt Disney Company (DIS)
DIS operates as an entertainment company worldwide along with its subsidiaries. It has two operational segments: Disney Media and Entertainment Distribution; and Disney Parks, Experiences, and Products. The company is involved in the film and episodic television content production and distribution activities and operates under the television broadcast networks ABC, Disney, ESPN, Freeform, FX, Fox, National Geographic, and Star brands.
During the first quarter ended January 1, 2022, cash used in investing activity increased 34.8% year-over-year to $987.00 million. Its cash and cash equivalent stood at $14.44 billion for the nine months ended January 1, 2022. The stock has declined 14.9% year-to-date.
In terms of forward non-GAAP P/E, DIS is trading at 29.64x, which is 74.8% higher than the 16.95x industry average. Also, in terms of its forward EV/Sales, the stock is currently trading at 3.45x, 54.4% higher than the 2.24x industry average.
DIS's poor prospects are also apparent in its POWR Ratings. It also has a D grade for Value and Quality. DIS is ranked 13 of 19 stocks in the F-rated Entertainment - Media Producers industry.
Click here to see the additional POWR Ratings for DIS (Growth, Momentum, Stability, and Sentiment).
NIKE, Inc. (NKE)
NKE is engaged in the design, development, marketing, and selling of athletic footwear, apparel, equipment, and accessories worldwide through its subsidiaries. The company offers its products in six categories, including running, NIKE basketball, the Jordan brand, football, training, and sportswear, and markets products designed for other athletic and recreational uses.
In the second quarter ended November 30, 2021, NKE's overhead operating expense increased 8% year-over-year to $2.74 million. Analysts expect NKE's EPS to decline 20% in the third quarter ending February 2022.
In terms of forward Price/Book, NKE'S 14.15x is 445.8% higher than the 2.59x industry average. In addition, its 4.12x forward Price/Sales is 353.4% higher than the 0.19x industry average. The company's shares have plunged 26.4% year-to-date.
NKE's weak fundamentals are reflected in its POWR ratings. The stock has a D grade for Growth and Value. In the C-rated Athletics & Recreation industry, it is ranked #18 of 36 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the NKE's rating for Momentum, Stability, Sentiment, and Quality here.
HD shares were unchanged in after-hours trading Monday. Year-to-date, HD has declined -22.83%, versus a -12.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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