Expectations Investing

revenue per store. For each 1 percent change in new-store growth, the

company’s value rises or falls by about 7 percent. Although achieving

growth targets is critical, the company must not open new stores so

quickly so as to cannibalize sales at existing stores. Meeting new-store

targets is so important that a one-year delay in scheduled openings

reduces The Home Depot’s value by almost 16 percent. Two leading

indicators—growth in new stores and revenue per store—largely deter-

mine The Home Depot’s sales growth rate and expectations revisions

for shareholder value.

PITFALLS TO AVOID

We all occasionally fall into psychological traps that keep us from ...