Home Depot stock (NYSE:HD) has been one of the worst performers in the Dow Jones Industrials index so far in 2022, down almost 30%.

The home renovation business may be the epicenter of investor concern about a looming recession. Mortgage rates are rising, and demand may fall drastically, given how much money people have spent on mortgages in the last two years. Other industries, such as e-commerce and home furnishings, now suffer from a terrible growth hangover.

However, investing isn’t about concentrating on the next few quarters, which will be difficult for the home improvement giants. Let’s see whether investors can safely ignore the impending volatility while contemplating purchasing Home Depot stock (NYSE:HD) right now.

Home Depot Stock: Home Depot is a world-class corporation.

Home Depot has all of the characteristics of a company with significant, long-term competitive advantages. Its yearly sales have more than quadrupled since the previous housing market cyclical slump, rising to $151 billion last year from $66 billion in 2010. Home Depot gradually increased its market share in a growing sector during that period.

Financial figures are also remarkable. The company’s cash flow, return on invested capital, and profit growth are all excellent. Operating profit margins routinely outperform industry rivals.

That track record should be enough for investors to assume that, as it has in the past, Home Depot will almost surely emerge from any demand dip as a stronger corporation. However, there is one huge danger to that forecast.

A period of increasing interest rates

The issue is that a protracted period of high or increasing interest rates might fundamentally impair Home Depot’s momentum. Given how swiftly it has developed in recent years because of historically cheap borrowing rates, the housing market may remain poor for some time. These expenditures rose in tandem with property prices, putting a strain on homeowners’ finances.

So far, Home Depot has maintained its growth rate despite the pressure, in part because a large portion of its business is centered on professional contractors. Lowe’s, which caters to do-it-yourself clients, saw a more severe growth slowdown. That’s a plus for Home Depot in terms of mitigating any forthcoming collapse, but it doesn’t imply the market leader will be immune to a broader industry downturn.

Why should you purchase Home Depot stock?

Long-term shareholders of this stock (NYSE:HD) seem to benefit from the risk-reward trade-off. While Home Depot stock (NYSE:HD) is facing a difficult phase, it is not at risk of losing its industry-leading position. After all, cyclical downturns are a natural aspect of its business, and it has successfully navigated prior ones.

Investors may patiently hold the stock if a downturn occurs until the inevitable industry bounces. They may also opt to reinvest in Home Depot’s consistently growing dividends.

There is always the possibility that Home Depot stock (NYSE:HD) worth may fall further. However, investors should not allow a few percentage points of additional potential returns to deter them from buying a great firm like this.

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