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If demand returns faster than expected, earnings per share could reach the upper end of the estimate range for the year ending 2028-01-31 while cash generation stays strong.
Sales growth in the main store business falls below two percent for two consecutive fiscal years.
The rating is Sell. The report-date price sits above our estimate of what Home Depot is worth.
Sell means we would reduce a holding rather than add to one. The report-date price is above our Fair value, so a buyer today pays more than the business appears to be worth.
The main risk is that sales in the largest business slow. That line supplied $151.97 billion of the $164.68 billion of total sales in the year ended 2026-02-01. Store and staffing costs do not fall as fast, so profit would drop faster than sales.7
The clearest reason it could work: the business turns reported profit into cash. Operating cash was $16.33 billion against $14.16 billion of profit in the year ended 2026-02-01, funding the dividend and store investment.6
Demand improves modestly. Analyst sales estimates for the year ending 2028-01-31 point to growth, with a mid estimate of $177.49 billion. That is an expectation, not a result already achieved.
Sell: the report-date price exceeds our estimate of the company's worth.
Sell: the report-date price exceeds our estimate of the company's worth.
The Home Depot, Inc. offers its associates the opportunity to benefit from robust development opportunities. Its Home Depot University, or “HDU,” program, is a key part of this development, offering relevant content through multiple platforms, including instructor-led classes, e-learning, mobile learning, and additional online resources.
The Home Depot, Inc. also provides a number of services, including home improvement installation services, and tool and equipment rental. The Home Depot, Inc. currently conducts these operations in the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S.
The primary business transmits the weakness because smaller segments offer limited offset. Positive FY2025 free cash flow cushions funding pressure but does not prevent lower earnings and value.
Home projects stay deferred and sales growth in the main store business falls under two percent. Fixed costs then take a larger share of each sales dollar, so profit falls faster than sales. Two consecutive weak fiscal years would confirm this path.
Annual revenue growth falls below 2%, removing most expected expansion and causing operating deleverage in the primary business.
Operating margin falls below 10%, causing earnings and cash generation to decline faster than sales.
De vijf ontwikkelingen die onze beleggingsthese zouden verzwakken.
A breach would remove most forecast growth and spread fixed store and payroll costs across a weaker sales base, reducing earnings and cash.
Huidig:FY2025 revenue was $164.68 billion.
Waarschuwing alsBelow 2% in FY2027 or FY2028
Home Depot earns solid profits and turns reported profit into cash. Those are results, not protection. Available public information does not show a structural advantage that keeps rivals out, such as high switching costs, a distribution edge, or a scale advantage rivals cannot copy.
The nearest home-improvement retailer trades at a lower price per dollar of expected earnings than Home Depot. That gap means investors currently pay more for Home Depot's earnings. Other companies in the comparison sell coffee, food and apparel, so they test valuation only, not competitive strength.
Free cash flow was positive in the fiscal year ended 2026-02-01. That shows cash resilience. It does not show returns above what investors require.5
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Apply a terminal P/E to the dated forward path, then discount that future share value back to the analysis date.
None of the valuation methods used to calculate Fair value relies on a separate assumption about how long the competitive advantage lasts.
The highlighted cell is Fair value when every assumption sits at its base level ($215.78). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $15.9B after modeled capex of $3.6B, with terminal value at 55.0% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to revenue, reinvestment, or gross margin resets materially.
Sales recover at a low-single-digit rate through the year ending 2028-01-31, consistent with the annual revenue estimate. Even with that recovery, the report-date market valuation remains above the $215.78 fair-value midpoint.1
The report-date price remains above fair value, so one strong result would improve confidence in the recovery but would not by itself remove the valuation concern.
Expected delivery would preserve a modest recovery without extending visibility beyond FY2028.
Weak primary-business sales or poorer cash backing would show that earnings power is falling rather than merely delayed.
FY2025 operating cash exceeded reported profit, although one period does not establish durable cash growth.6
Slower growth would increase pressure from fixed store costs and reduce profit.6
Weakness in the dominant business would flow directly into consolidated sales and profit.7
In the year ended 2026-02-01 the business produced $16.33 billion of operating cash, spent $3.68 billion on stores and equipment, and kept $12.65 billion.56
Dividends of $9.15 billion took most of that free cash in the same year. Debt stood at $63.19 billion on 2026-09-08, so paying down borrowings competes directly with the dividend.
Available public information does not establish a multi-year trend in returns on the money invested in the business. Operating profit was $20.89 billion in the year ended 2026-02-01.
No comparison of returns earned against the return investors require is supported here, so no conclusion is drawn.
Operating cash flow was $16.33 billion against reported profit of $14.16 billion for the year ended 2026-02-01
Profit arrived as real cash that year, which supports the dividend.
Free cash flow was $12.65 billion and dividends paid were $9.15 billion in the year ended 2026-02-01
Little room remains for buybacks or debt reduction without cash improving.
Total debt was $63.19 billion on 2026-09-08
If lenders demand more, interest costs rise and less cash reaches owners.
| Omzet | US$ 164.683.000.000 |
|---|---|
| Kostprijs van de omzet | US$ 109.818.000.000 |
| Brutowinst | US$ 54.865.000.000 |
| Bedrijfskosten | US$ 33.975.000.000 |
| Bedrijfsresultaat | US$ 20.890.000.000 |
| Niet-operationele posten en belastingen | US$ -6.734.000.000 |
| Nettowinst | US$ 14.156.000.000 |
| Totale activa | US$ 105.095.000.000 |
|---|---|
| Liquide middelen | US$ 1.389.000.000 |
| Vlottende activa | US$ 34.391.000.000 |
| Totale verplichtingen | US$ 92.282.000.000 |
| Kortlopende verplichtingen | US$ 32.424.000.000 |
| Eigen vermogen | US$ 12.813.000.000 |
| Nettowinst | US$ 14.156.000.000 |
|---|---|
| Operationele instroom | US$ 18.192.000.000 |
| Afschrijvingen en amortisatie | US$ 3.514.000.000 |
| Aandelenbeloning | US$ 522.000.000 |
| Operationele kasstroom | US$ 16.325.000.000 |
| Operationele uitstroom | US$ 1.867.000.000 |
| Beschikbare liquide middelen | US$ 18.083.000.000 |
| Beginstand liquide middelen | US$ 1.659.000.000 |
| Wisselkoerseffect | US$ 99.000.000 |
| Investeringsuitstroom | US$ 8.980.000.000 |
| Investeringen | US$ 3.679.000.000 |
| Overige investeringsactiviteiten | US$ 5.301.000.000 |
| Financieringsuitstroom | US$ 7.714.000.000 |
| Eindstand liquide middelen | US$ 1.389.000.000 |
| Investeringskasstroom | US$ -8.980.000.000 |
| Financieringskasstroom | US$ -7.714.000.000 |
Bron: SEC EDGAR · Ingediend 2026-03-18 · SEC EDGAR
| Omzet per operationeel segment | Omzet | Aandeel | j-o-j |
|---|---|---|---|
| Primary | US$ 152 mld. | 92,3% | -0,7% |
| All Other Segments | US$ 12,7 mld. | 7,7% | 98,5% |
Bron: SEC EDGAR · Ingediend 2026-03-18 · SEC EDGAR
| Omzet per regio | Omzet | Aandeel | j-o-j |
|---|---|---|---|
| United States | US$ 152,2 mld. | 92,4% | 3,5% |
| Non Us | US$ 12,5 mld. | 7,6% | 0% |
Financiële momentopname gebruikt in de analyse van 2026-09-08.
| Periode | Omzet | EBITDA | Nettowinst | Operationele kasstroom | Vrije kasstroom | Investeringen | Afschrijvingen en amortisatie | Aandelenbeloning | Aandeleninkoop | Betaalde dividenden | Netto schuldemissie | Investeringskasstroom | Financieringskasstroom | Beginstand liquide middelen | Eindstand liquide middelen | Kas en beleggingen | Totale schuld | Operationele marge | ROIC | WACC | ROIC−WACC-spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017-01-29 | US$ 94,6 mld. | US$ 15,4 mld. | US$ 8 mld. | US$ 9,8 mld. | US$ 8,2 mld. | US$ 1,6 mld. | US$ 2 mld. | US$ 267 mln. | US$ 6,9 mld. | US$ 3,4 mld. | — | -US$ 1,6 mld. | -US$ 7,9 mld. | — | US$ 2,5 mld. | US$ 2,5 mld. | US$ 23,6 mld. | 14,2% | — | 6,5% | — |
| 2018-01-28 | US$ 100,9 mld. | US$ 16,8 mld. | US$ 8,6 mld. | US$ 12 mld. | US$ 10,1 mld. | US$ 1,9 mld. | US$ 2,1 mld. | US$ 273 mln. | US$ 8 mld. | US$ 4,2 mld. | — | -US$ 2,2 mld. | -US$ 8,9 mld. | US$ 2,5 mld. | US$ 3,6 mld. | US$ 3,6 mld. | US$ 27 mld. | 14,5% | — | 6,9% | — |
| 2019-02-03 | US$ 108,2 mld. | US$ 17,9 mld. | US$ 11,1 mld. | US$ 13,2 mld. | US$ 10,7 mld. | US$ 2,4 mld. | US$ 2,2 mld. | US$ 282 mln. | US$ 10 mld. | US$ 4,7 mld. | — | -US$ 2,4 mld. | -US$ 12,5 mld. | US$ 3,6 mld. | US$ 1,8 mld. | US$ 1,8 mld. | US$ 29,2 mld. | 14,4% | — | 6,9% | — |
| 2020-02-02 | US$ 110,2 mld. | US$ 18,2 mld. | US$ 11,2 mld. | US$ 13,7 mld. | US$ 11 mld. | US$ 2,7 mld. | US$ 2,3 mld. | US$ 251 mln. | US$ 7 mld. | US$ 6 mld. | — | -US$ 2,7 mld. | -US$ 10,8 mld. | US$ 1,8 mld. | US$ 2,1 mld. | US$ 2,1 mld. | US$ 29,5 mld. | 14,4% | — | 5,7% | — |
| 2021-01-31 | US$ 132,1 mld. | US$ 20,8 mld. | US$ 12,9 mld. | US$ 18,8 mld. | US$ 16,4 mld. | US$ 2,5 mld. | US$ 2,5 mld. | US$ 310 mln. | US$ 791 mln. | US$ 6,5 mld. | — | -US$ 10,2 mld. | -US$ 3 mld. | US$ 2,1 mld. | US$ 7,9 mld. | US$ 7,9 mld. | US$ 34,8 mld. | 13,8% | — | 5,5% | — |
| 2022-01-30 | US$ 151,2 mld. | US$ 25,9 mld. | US$ 16,4 mld. | US$ 16,6 mld. | US$ 14 mld. | US$ 2,6 mld. | US$ 2,9 mld. | US$ 399 mln. | US$ 14,8 mld. | US$ 7 mld. | — | -US$ 3 mld. | -US$ 19,1 mld. | US$ 7,9 mld. | US$ 2,3 mld. | US$ 2,3 mld. | US$ 36,4 mld. | 15,2% | — | 6,3% | — |
| 2023-01-29 | US$ 157,4 mld. | US$ 27,1 mld. | US$ 17,1 mld. | US$ 14,6 mld. | US$ 11,5 mld. | US$ 3,1 mld. | US$ 2,8 mld. | US$ 366 mln. | US$ 6,7 mld. | US$ 7,8 mld. | US$ 3,4 mld. | -US$ 3,1 mld. | -US$ 11 mld. | US$ 2,3 mld. | US$ 2,8 mld. | US$ 2,8 mld. | US$ 41,2 mld. | 15,3% | — | 7,8% | — |
| 2024-01-28 | US$ 152,7 mld. | US$ 25,1 mld. | US$ 15,1 mld. | US$ 21,2 mld. | US$ 17,9 mld. | US$ 3,2 mld. | US$ 3,1 mld. | US$ 380 mln. | US$ 8 mld. | US$ 8,4 mld. | US$ 724 mln. | -US$ 4,7 mld. | -US$ 15,4 mld. | US$ 2,8 mld. | US$ 3,8 mld. | US$ 3,8 mld. | US$ 42,2 mld. | 14,2% | — | 8,6% | — |
| 2025-02-02 | US$ 159,5 mld. | US$ 25,4 mld. | US$ 14,8 mld. | US$ 19,8 mld. | US$ 16,3 mld. | US$ 3,5 mld. | US$ 3,3 mld. | US$ 442 mln. | US$ 649 mln. | US$ 8,9 mld. | US$ 8,8 mld. | -US$ 21 mld. | -US$ 694 mln. | US$ 3,8 mld. | US$ 1,7 mld. | US$ 1,7 mld. | US$ 51,4 mld. | 13,5% | — | 9,0% | — |
| 2026-02-01 | US$ 164,7 mld. | US$ 24,3 mld. | US$ 14,2 mld. | US$ 16,3 mld. | US$ 12,6 mld. | US$ 3,7 mld. | US$ 3,5 mld. | US$ 522 mln. | US$ 0 | US$ 9,2 mld. | US$ 1,3 mld. | -US$ 9 mld. | -US$ 7,7 mld. | US$ 1,7 mld. | US$ 1,4 mld. | US$ 1,4 mld. | US$ 49,4 mld. | 12,7% | — | 8,5% | — |
The Home Depot Inc. (HD) trades at 21.2x forward earnings against a peer median of 20.6x. Its EV/EBITDA of 15.5x compares with a peer median of 16.5x. The comparison uses 4 peers: Lowe's Companies Inc., Starbucks Corporation, McDonald's Corporation and The TJX Companies Inc., as of 2026-09-08.
Industry capital spending runs near six percent of sales, with spending slightly above the rate assets wear out.
Demand improves modestly. Analyst sales estimates for the year ending 2028-01-31 point to growth, with a mid estimate of $177.49 billion. That is an expectation, not a result already achieved.
Home projects are easy to delay. If customers postpone them, sales in the main store business slow, and that business supplied $151.97 billion of the $164.68 billion total in the year ended 2026-02-01.
Home Depot's scale is real, but growth depends on one large business recovering. At today's size, the smaller businesses would need very rapid growth to offset a sustained shortfall there.7
No new position; reduce any existing holding. The Sell rating requires lower exposure while the accepted valuation remains below the report-date price.4
Reduce in stages and accelerate when an operating threshold breaks. Substantial debt increases the financial effect of weaker cash generation.
The dividend was covered by free cash in the year ended 2026-02-01, but $9.15 billion of payouts took most of the $12.65 billion generated.5
No structural advantage was established, and the report-date price sits above our estimate of value.
Shares cost more per dollar of expected earnings than the nearest home-improvement rival, without proven faster growth.3
The rating is Sell because the report-date price is above our estimate of what the business is worth.
Home Depot generates real cash and pays a covered dividend. But growth is modest, concentrated in one large business, and no lasting competitive barrier was established. That combination does not support the report-date market valuation.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
The records this analysis drew on, as they stood when it was run.
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Forward P/E falls below 17x before earnings accelerate, reducing the price investors pay for expected profit.3
Full-year operating cash falls below 0.8 times reported profit, weakening support for dividends and reinvestment.
The moderate cost of equity exceeds 11.78%, reducing the present value of future cash while debt remains substantial.24
Waarschuwing alsBelow 2% for two consecutive fiscal years
Lower profit per sales dollar would turn weak demand into sustained earnings pressure and leave less internally generated cash for dividends and investment.
Huidig:FY2025 operating income was $20.89 billion.
Waarschuwing alsBelow 10% of revenue within 24 months
Less cash behind reported profit would force dividends, capital spending and debt repayment to compete for a smaller internally funded pool.
Huidig:FY2025 operating cash was $16.33 billion against $14.16 billion of profit.
Waarschuwing alsFull-year operating cash below 0.8 times reported profit
A higher required return would reduce what future dividends and cash flows are worth today, even if operating results remain positive.
Huidig:The moderate cost of equity was 9.7802% on 2026-09-08.
Waarschuwing alsAbove 11.78% within 12 months
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and terminal value at WACC, then adjust for signed net debt per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Discount the explicit dividend path and its Gordon-growth terminal value at cost of equity.
Limitation: Terminal value is 71.4% of this model's value, above the 60% level at which the methodology flags concentration; the value leans on the years beyond the explicit forecast.
Solve for the growth rate that makes the model value equal the report-date share price.
Demand returns faster, earnings per share reach the upper end of the estimate range for the year ending 2028-01-31, and investors continue to award the same earnings multiple. Meaningful upside requires stronger earnings and sustained valuation support at the same time.1
A thinner margin would reduce earnings and the cash available for dividends.6
Poorer cash backing would increase reliance on borrowing for dividends and investment.6
Peer outgrowth alongside weaker margins could cause investors to pay less for Home Depot earnings.1
| $182.81B |
| $187.75B |
| $192.44B |
| Operating income | $21.75B | $22.51B | $23.18B | $23.81B | $24.40B |
| NOPAT | $16.56B | $17.13B | $17.65B | $18.12B | $18.58B |
| Residual cash after reinvestment policy | $16.56B | $17.13B | $17.65B | $18.12B | $18.58B |
| Revenue growth | 4.2% | 3.5% | 3.0% | 2.7% | 2.5% |
| Operating margin | 12.7% | 12.7% | 12.7% | 12.7% | 12.7% |
| Tax rate | 23.9% | 23.9% | 23.9% | 23.9% | 23.9% |
| Reinvestment rate | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Terminal growth | 2.5% | 2.5% | 2.5% | 2.5% | 2.5% |
| Marge |
|---|
| HD | The Home Depot Inc. | $320.3B | 21.2x | 1.9x | 15.5x | 104.3% | — |
| LOW | Lowe's Companies Inc. | 15.7x | 1.3x | 12.1x | — | 13.4% | |
| SBUX | Starbucks Corporation | 33.5x | 3.1x | 24.4x | — | 12.9% | |
| MCD | McDonald's Corporation | 18.3x | 6.5x | 15.7x | — | 46.5% | |
| TJX | The TJX Companies Inc. | 22.9x | 2.3x | 17.3x | 62.2% | 10.9% |
| Two consecutive fiscal years below 2% |
| Exit fully because smaller segments offer limited offset to sustained primary-business weakness.7 |
