Home Depot Inc. (NYSE: HD) recently reported its fiscal third-quarter financial results and the stock posted a solid day of gains in the wake of these earnings. As a result, one key independent research firm released a report further detailing Home Depot’s position.

The company posted $1.35 in earnings per share (EPS) on revenue of $21.8 billion. That compared to Thomson Reuters consensus estimates of $1.32 in EPS on $21.76 billion in revenue. In the same period of the previous year, the retailer posted EPS of $1.11 and $20.52 billion in revenue.

Comparable store sales for the third quarter of fiscal 2015 were positive 5.1%, and comp sales for U.S. stores were positive 7.3%.

Argus maintained a Buy rating for Home Depot and raised its price target to $142 from $136, implying upside of roughly 14% from current prices.

The firm raised its fiscal 2016 EPS estimate to $5.37 from $5.35. This revision reflects the higher-than-expected third-quarter GAAP results and a little bit of rounding. The fourth-quarter estimate remains at $1.07. Demand is very strong in the sector, so Argus is raising its sales forecast to approximately 6% for the fourth quarter.

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Increasing returns on capital, signs of improving customer service during recent store visits, rising home prices and impressive execution of the business plan support Argus’s conviction that even after raising the operating margin by approximately 400 basis points over the past four years, Home Depot still has room to increase earnings and profitability. The trailing four-quarter return on invested capital was 26.2%, up 400 basis points from last year’s third quarter.

Lowe’s Companies Inc. (NYSE: LOW), Home Depot’s chief competitor, has been seeing signs of modest home price appreciation in mid-sized markets, an increasing customer willingness to invest in home improvement, and an uptick in big-ticket projects.

The National Association of Home Builders Remodeling Index indicates improving conditions. Harvard University’s Leading Indicator of Remodeling Activity also points to growth, but at a slower rate in 2015, before accelerating again in early 2016. Argus believes that these factors point to sustainable growth for Home Depot and Lowe’s.

Shares of Home Depot traded down less than 1% at $125.17 late Wednesday morning, with a consensus analyst price target of $131.48 and a 52-week trading range of $92.17 to $126.73.

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