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Home Depot (HD)
NYSE:HD
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Home Depot
(NYSE:HD)
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Rating:65Neutral
Price Target:
$413.00
▲(15.39% Upside)
Action:ReiteratedDate:02/25/26
The score is driven primarily by solid but weakening financial performance—strong profitability/cash flow tempered by slowing/negative growth, margin pressure, and elevated leverage. Technicals are supportive with a positive trend above major moving averages, while valuation looks somewhat premium despite a decent dividend. Earnings call guidance suggests modest recovery, but near-term EPS and margin headwinds limit upside.
Positive Factors
Consistent Free Cash Flow
Sustained FCF near $12.6B provides durable internal funding for dividends, store/SRS expansion, and selective M&A without sole reliance on external financing. Even with weakened momentum, strong cash conversion supports capital allocation and buffers cyclical downturns over the next 2–6 months.
High Margins and Profitability
Above-industry gross and operating margins reflect scale, procurement leverage, private labels, and service mix, enabling durable profitability. These margins underpin strong ROIC (~25.7 TTM) and provide structural ability to absorb cost pressure while funding returns to shareholders.
Pro, SRS & Omnichannel Momentum
Outperformance in professional customers, SRS expansion, and accelerating online fulfillment (store-fulfilled orders >50%) strengthen share-of-wallet and cross-selling durability. The omnichannel/store network and Pro focus create structural growth levers less sensitive to short-term retail swings.
Negative Factors
Elevated Leverage
Material leverage and a thin equity base reduce financial flexibility and increase vulnerability to interest-cost swings or cyclical revenue softness. High debt levels constrain discretionary buybacks and raise refinancing and liquidity risk over the medium term unless deleveraging accelerates.
Margin Compression & Expense Deleverage
Wider operating cost ratios and lower adjusted margins reflect acquisition-related expense base, mix shifts, and topline deleverage. If expense deleverage persists, it will structurally limit earnings recovery and ROIC despite revenue initiatives, pressuring cash available for growth or returns.
Persistent Housing & Category Weakness
Structural softness in housing turnover and specific category declines (eg, roofing -28% shipments) curb big-ticket and installation demand. This reduces addressable spend for several high-margin categories and could keep comps and margin recovery muted over the coming months.
Home Depot (HD) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$360.06B
Dividend Yield2.67%
Average Volume (3M)3.95M
Price to Earnings (P/E)26.5
Beta (1Y)0.80
Revenue Growth7.50%
EPS Growth-0.38%
CountryUS
Employees470,100
SectorConsumer Cyclical
Sector Strength84
IndustryHome Improvement
Share Statistics
EPS (TTM)2.72
Shares Outstanding995,511,500
10 Day Avg. Volume4,365,985
30 Day Avg. Volume3,948,281
Financial Highlights & Ratios
PEG Ratio-5.75
Price to Book (P/B)29.30
Price to Sales (P/S)2.28
P/FCF Ratio29.69
Enterprise Value/Market Cap1.19
Enterprise Value/Revenue2.60
Enterprise Value/Gross Profit7.81
Enterprise Value/Ebitda17.64
Forecast
1Y Price Target
$422.47Price Target Upside18.03% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering20
EPS Forecast (FY)15.05
Revenue Forecast (FY)$171.08B
Home Depot Business Overview & Revenue Model
Company DescriptionThe Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products The company also offers installation services for flooring, cabinets and cabinet makeovers, countertops, furnaces and central air systems, and windows. In addition, it provides tool and equipment rental services. The company primarily serves homeowners; and professional renovators/remodelers, general contractors, maintenance professionals, handymen, property managers, building service contractors, and specialty tradesmen, such as electricians, plumbers, and painters. It also sells its products through websites, including homedepot.com; blinds.com, an online site for custom window coverings; and thecompanystore.com, an online site for textiles and décor products. As of December 31, 2021, the company operated 2,317 stores in the United States. The Home Depot, Inc. was incorporated in 1978 and is based in Atlanta, Georgia.
How the Company Makes MoneyHome Depot generates revenue primarily through the retail sale of home improvement products and services. Its key revenue streams include sales from in-store purchases, online sales via its e-commerce platform, and installation services. The company benefits from a diverse customer base that includes individual homeowners, professional contractors, and businesses, allowing it to capture a wide market share. Additionally, Home Depot has established significant partnerships with suppliers and manufacturers, ensuring a steady supply of goods at competitive prices. The company's focus on enhancing customer experience through an omnichannel approach, combining physical stores with digital capabilities, further contributes to its earnings by driving sales and increasing customer loyalty.
Home Depot Key Performance Indicators (KPIs)
Any
Revenue by Geography
Breaks down revenue across different regions, revealing where Home Depot is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Breaks down revenue across different regions, revealing where Home Depot is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Data provided by:
The Fly
The FlyHome Depot Earnings Call Summary
Earnings Call Date:Feb 24, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 19, 2026
Earnings Call Sentiment Neutral
The call presented a mix of positive operational momentum and near-term financial headwinds. Positives include 3.2% annual revenue growth to $164.7B, stable positive comparable sales, strong digital performance (+~11% online comp sales in Q4), Pro and SRS share gains, record promotional event performance, continued investment in stores and Pro capabilities, and an increased dividend. Offsetting these are margin compression, higher operating expenses as a percent of sales, declines in adjusted EPS (Q4 down ~13% adjusted; FY down ~3.6% adjusted), inventory build and lower turns, and persistent macro pressures (housing affordability, low turnover, and a weak roofing market with shipments down ~28% in Q4). The company provided FY26 guidance calling for modest sales and EPS growth (total sales +2.5% to +4.5%, comps flat to +2%, adjusted EPS flat to +4%) while noting first-half margin impacts from acquisition annualization. Overall, the results show solid strategic progress (digital, Pro, acquisitions) but also notable near-term profitability and macro headwinds that balance the positives.Q4-2025 Updates
Positive Updates
Annual Revenue Growth
Fiscal 2025 sales of $164.7 billion, up 3.2% versus fiscal 2024, demonstrating top-line growth despite industry headwinds.
Comparable Sales Positive
Total company comparable sales increased 0.3% for the year and 0.4% in Q4; U.S. comps up 0.5% for the year and 0.3% in Q4, reflecting stable underlying demand.
Digital and Interconnected Sales Momentum
Total company online comp sales grew approximately 11% in Q4 year-over-year; over 50% of online orders are fulfilled through stores, and enhancements (e.g., real-time big-and-bulky tracking) improved delivery reliability.
Pro and SRS Momentum
Pro posted positive comps and outperformed DIY in Q4; SRS grew organic sales by a low single-digit percentage in FY25, expanded market share, and is expected to grow organic sales mid-single digits in fiscal 2026.
Record Promotional Event Performance
Gift Center and Black Friday events posted record sales years in Q4, indicating strong event execution and customer engagement.
Capital Allocation and Shareholder Returns
Paid approximately $9.2 billion in dividends during FY25; Board increased quarterly dividend by 1.3% to $2.33 per share (annual $9.32); capital expenditures were ~$3.7 billion for the year with continued targeted investment.
Store and Network Expansion
Opened 12 new stores in FY25 (ending store count 2,359) and plans for ~15 new stores plus 40-50 new SRS locations in FY26, supporting growth and Pro penetration.
High Return on Invested Capital
Computed ROIC for trailing 12 months was approximately 25.7%, demonstrating strong returns despite a decline from 31.3% the prior year.
Negative Updates
Earnings Per Share Declines
Adjusted diluted EPS for fiscal 2025 was $14.69, down 3.6% versus fiscal 2024; adjusted diluted EPS for Q4 was $2.72, down 13.1% year-over-year. GAAP diluted EPS for the year was $14.23, down 4.6%.
Margin Compression
FY gross margin ~33.3% (down ~10 bps); Q4 gross margin ~32.6% (down ~20 bps). Adjusted operating margin for FY25 ~13.1% (down ~70 bps) and for Q4 ~10.5% (down ~120 bps), reflecting mix (GMS acquisition) and deleverage.
Operating Expense Deleverage
Operating expense as a percent of sales increased ~105 basis points in Q4 to 22.6% and ~70 basis points for the year to 20.6%, driven by topline deleverage, timing and the GMS expense base.
Inventory Growth and Lower Turns
Merchandise inventories of $25.8 billion were up approximately $2.4 billion versus last year (impacted by higher costs and GMS acquisition); inventory turns declined from 4.7x to 4.4x, indicating reduced turnover or higher stocking levels.
Industry and Housing Headwinds
Company cited continued pressure from housing affordability, low housing turnover (multi-year lows since 2023), and consumer uncertainty; roofing industry shipments fell ~28% in Q4 (lowest since 2019), pressuring certain categories and margins.
Acquisition Mix Impact (GMS)
GMS acquisition contributed to mix-driven gross margin pressure (pro forma impact ~40 bps annually; Q4 saw a ~20 bps mix decline), and partial-year ownership increased expense base and first-half margin headwinds in FY26.
Near-Term EPS and Margin Headwinds
Expectations for FY26 include first-quarter mid-single-digit percentage negative EPS versus prior year (driven by acquisition annualization and timing). Company expects adjusted EPS to be approximately flat to +4% for fiscal 2026.
ROIC and Profitability Decline
Return on invested capital decreased to ~25.7% from 31.3% in the prior-year quarter, indicating lower profitability efficiency year-over-year.
Company Guidance
Home Depot affirmed fiscal 2026 guidance calling for total sales growth of approximately 2.5%–4.5% and comparable sales flat to +2%, with diluted and adjusted diluted EPS each expected to increase approximately flat to +4%; full-year gross margin ~33.1% (about a 24 bps headwind YoY from GMS annualization), operating margin ~12.4%–12.6% and adjusted operating margin ~12.8%–13%, an effective tax rate of ~24.3% and net interest expense of ~$2.3B. They expect SRS organic sales to grow mid-single-digits, plan to open ~15 new Home Depot stores and 40–50 new SRS locations, and target capital expenditures of roughly 2.5% of sales; they also said first-half comps should be slightly below the second half, Q1 EPS to be mid-single-digit percent negative year-over-year due to acquisition annualization and timing, and first-half gross margin to be down ~50 bps versus last year (with second-half roughly flat).Home Depot Financial Statement Overview
Summary
Profitability and cash generation remain solid (gross margin ~33–34%, TTM FCF ~$12.6B), but fundamentals have softened versus 2022–2023 with negative TTM revenue growth, margin compression, and weaker FCF momentum. Balance-sheet risk is a clear drag due to elevated leverage and a thin/volatile equity base (debt-to-equity ~4.9 TTM).Income Statement
Home Depot shows strong, steady profitability with solid gross margins (~33–34%) and healthy operating profitability (EBITDA margin ~15–17%) across the period. However, growth has clearly cooled: TTM (Trailing-Twelve-Months) revenue growth is negative and margins have compressed versus 2022–2023 levels, with net margin down to ~8.8% in TTM (Trailing-Twelve-Months) from ~10–11% in 2022–2023.74
Positive
Balance Sheet
Leverage is elevated, with debt meaningfully outweighing equity (debt-to-equity ~9.4 in 2025 and ~4.9 in TTM (Trailing-Twelve-Months)), which reduces balance-sheet flexibility. Equity has been unusually low/volatile (including negative in 2022), making the capital structure more risk-sensitive even though reported returns on equity are very high in several years (largely boosted by the small equity base).48
Neutral
Cash Flow
Cash generation is consistently positive with solid free cash flow in both annual periods and TTM (Trailing-Twelve-Months) (TTM free cash flow ~$12.6B). That said, cash flow momentum has weakened recently (TTM free cash flow down sharply vs. the prior year), and free cash flow runs below net income (about ~0.79x in TTM (Trailing-Twelve-Months)), indicating earnings are not fully translating into free cash after investment and working-capital needs.66
Positive
| Breakdown | Jan 2026 | Jan 2025 | Jan 2024 | Jan 2023 | Jan 2022 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 164.68B | 159.51B | 152.67B | 157.40B | 151.16B |
| Gross Profit | 54.87B | 53.31B | 50.96B | 52.78B | 50.83B |
| EBITDA | 24.29B | 25.43B | 25.11B | 27.07B | 25.95B |
| Net Income | 14.16B | 14.81B | 15.14B | 17.11B | 16.43B |
Balance Sheet | |||||
| Total Assets | 105.09B | 96.12B | 76.53B | 76.44B | 71.88B |
| Cash, Cash Equivalents and Short-Term Investments | 1.39B | 1.66B | 3.76B | 2.76B | 2.34B |
| Total Debt | 73.51B | 62.29B | 52.24B | 50.36B | 46.27B |
| Total Liabilities | 92.28B | 89.48B | 75.49B | 74.88B | 73.57B |
| Stockholders Equity | 12.81B | 6.64B | 1.04B | 1.56B | -1.70B |
Cash Flow | |||||
| Free Cash Flow | 12.65B | 16.32B | 17.95B | 11.50B | 14.01B |
| Operating Cash Flow | 16.32B | 19.81B | 21.17B | 14.62B | 16.57B |
| Investing Cash Flow | -8.98B | -21.03B | -4.73B | -3.14B | -2.97B |
| Financing Cash Flow | -7.71B | -694.00M | -15.44B | -10.99B | -19.12B |
Home Depot Technical Analysis
Negative
357.92
Price Trends
372.18
Negative
367.82
Negative
374.06
Negative
Market Momentum
-3.26
Positive
36.15
Neutral
14.92
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HD, the sentiment is Negative. The current price of 357.92 is below the 20-day moving average (MA) of 378.72, below the 50-day MA of 372.18, and below the 200-day MA of 374.06, indicating a bearish trend. The MACD of -3.26 indicates Positive momentum. The RSI at 36.15 is Neutral, neither overbought nor oversold. The STOCH value of 14.92 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HD.
Home Depot Risk Analysis
Home Depot disclosed 25 risk factors in its most recent earnings report. Home Depot reported the most risks in the "Production" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Home Depot Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $436.13B | ― | 30.32% | 0.59% | 8.34% | 9.58% | |
68 Neutral | $142.88B | 22.44 | ― | 1.94% | 0.64% | 0.58% | |
67 Neutral | $26.59B | 24.85 | 45.18% | 1.80% | 4.26% | 0.73% | |
65 Neutral | $360.06B | 26.52 | 145.54% | 2.67% | 7.50% | -0.38% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
59 Neutral | $6.76B | 43.30 | 9.11% | ― | 6.04% | 10.26% | |
51 Neutral | $13.75B | 12.85 | 37.04% | 5.46% | -0.95% | -48.28% |
* Consumer Cyclical Sector Average
HD
Home Depot
357.92
-7.62
-2.08%
BBY
Best Buy Co
66.68
-8.16
-10.90%
COST
Costco
998.10
68.78
7.40%
LOW
Lowe's
251.89
14.30
6.02%
TSCO
Tractor Supply
50.16
-6.08
-10.81%
FND
Floor & Decor Holdings
60.11
-32.78
-35.29%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.