Home Depot HD
What does Home Depot do?
Home Depot is the largest home improvement retailer in the United States and also operates stores in Canada and Mexico. Its assortment includes building materials, tools, garden and decor items, and products for maintenance and repair. It also offers installation services, for example for flooring, kitchens, bathrooms or heating and air-conditioning systems, as well as equipment rental.
Revenue comes from both retail customers, who renovate themselves or commission work, and professional customers such as tradespeople, construction firms and property managers. The professional business is gaining importance through delivery logistics, credit offerings and wholesale acquisitions. In terms of competitive position, the company benefits from its scale, a dense store network, high product availability and a strong purchasing position with suppliers. The main competitor is Lowe's; other competitors include online retailers, specialty stores and regional building materials dealers.
Score profile
Rank vs. Consumer Cyclical (245 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Home Depot ranks above average in the group Consumer Cyclical (6.9/10). On growth, the company ranks in the middle in the group Consumer Cyclical (5.8/10). On valuation (higher = cheaper), the stock ranks below average in the group Consumer Cyclical (2.5/10). On financial strength, Home Depot ranks below average in the group Consumer Cyclical (2.4/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 22.0x | 14.5x | better than 20 % |
| Trailing P/E | 24.6x | 19.2x | better than 31 % |
| PEG ratio | 1.8x | 1.3x | better than 33 % |
| EV/EBITDA | 16.8x | 11.3x | better than 20 % |
| Price/sales | 2.1x | 1.0x | better than 25 % |
| Price/book | 21.1x | 2.5x | better than 4 % |
| Revenue growth | 5.7% | 3.5% | better than 61 % |
| Earnings growth | 4.6% | 0.0% | better than 55 % |
| Gross margin | 32.8% | 35.9% | better than 43 % |
| Operating margin | 12.9% | 9.0% | better than 66 % |
| Net margin | 8.4% | 5.5% | better than 70 % |
| Return on equity | 104.3% | 11.8% | better than 97 % |
| Debt/equity | 380.3% | 86.2% | better than 9 % |
| Current ratio | 1.1x | 1.4x | better than 29 % |
| Free cash flow yield | 3.1% | 4.7% | better than 34 % |
| Dividend yield | 2.7% | 2.2% | – |
| Payout ratio | 64.8% | 34.6% | – |
| Beta | 0.95 | 1.17 | – |
Valuation: what is Home Depot worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Home Depot a model range of 173.66 USD to 276.23 USD per share.
32 analysts, average rating “Buy”, average price target 379.12 USD (+8.0%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand depends heavily on the housing market, home prices and homeowners' willingness to invest in renovations.
- The growing business with professional customers generates recurring, larger purchases and strengthens customer loyalty.
- Economies of scale in purchasing and logistics support margins and enable high product availability.
Risks
- Economic weakness, high interest rates and a weak real estate market can noticeably slow larger renovation projects and therefore revenue.
- Commodity and material prices as well as tariffs and supply chain disruptions can weigh on procurement costs and margins.
- Competition from Lowe's, online retailers and wholesalers can increase pricing pressure and cost market share.
What to look for with Home Depot
Comparable sales growth on existing store space is particularly informative, as it shows demand trends independent of store openings and acquisitions.