The Home Depot
HD
$350.78
-1.36%
The Home Depot, Inc. is the world's largest home improvement specialty retailer, operating 2,361 warehouse-format stores across the U.S., Canada, and Mexico, offering a vast assortment of building materials, home improvement products, lawn and garden items, and decor, along with installation services and tool rentals. As a market leader in the home improvement industry, Home Depot distinguishes itself through its extensive store network, robust supply chain, and growing focus on professional customers, bolstered by strategic acquisitions like Interline Brands, HD Supply, SRS, and GMS to expand into MRO and building products distribution. The current investor narrative centers on the company's ability to navigate a challenging housing market characterized by elevated interest rates and subdued demand, while simultaneously pursuing growth through professional customer penetration and digital transformation. Recent news highlights concerns about the Fed's steady rates pressuring the housing market, yet the company's first-quarter fiscal 2026 results showed a 4.8% revenue increase, signaling resilience and potential for continued expansion.…
HD
The Home Depot
$350.78
Related headlines
Investment Opinion: Should I buy HD Today?
We rate HD as a Hold, with a thesis that the company is a high-quality operator with a strong balance sheet and cash flow, but near-term headwinds from high interest rates and margin pressure limit upside. The analyst consensus is Buy with an average target of $370.34, implying 5.95% upside, which is modest. Key supporting evidence includes revenue growth of 4.8% in Q1, TTM FCF of $14.315B, a forward PE of 21.69, and a PS ratio of 2.28 below historical norms. However, the high debt-to-equity of 5.10 and declining margins warrant caution.
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HD 12-Month Price Forecast
The AI assessment is neutral with medium confidence. While HD shows a revenue rebound and strong cash flow, the high leverage and margin pressure create uncertainty. The stock appears fairly valued with limited upside in the base case. An upgrade to bullish would require evidence of margin stabilization and accelerating growth, while a downgrade would occur if revenue growth stalls or debt levels rise further.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on The Home Depot's 12-month outlook, with a consensus price target around $370.50 and implied upside of +5.6% versus the current price.
Average Target
$370.50
0 analysts
Implied Upside
+5.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$310 - $430
Analyst target range
Home Depot is covered by 32 analysts, with a consensus recommendation of 'Buy' and a mean rating of 1.94 (where 1 is Strong Buy and 5 is Sell). The average target price is $370.34, implying an upside of 5.95% from the current price of $349.52. The distribution shows a bullish tilt, with recent actions from firms like UBS, TD Cowen, and Truist maintaining Buy ratings, while Wolfe Research downgraded from Outperform to Peer Perform, indicating some mixed sentiment. The target price range spans from a low of $310.00 to a high of $430.00, with the high target suggesting a 23.0% upside, reflecting optimism about a housing market recovery and professional segment growth. The low target implies a 11.3% downside, pricing in prolonged high interest rates and weak consumer spending. The spread between high and low targets is 38.7% of the average target, indicating moderate uncertainty, but the overall consensus remains positive, with analysts expecting continued earnings growth and margin recovery.
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Bulls vs Bears: HD Investment Factors
Home Depot presents a mixed picture: strong cash generation, a rebound in revenue, and attractive valuation metrics are countered by high leverage, margin compression, and a challenging housing environment. Currently, the bull case has slightly stronger evidence given the recent revenue inflection and analyst optimism, but the bear case hinges on prolonged high interest rates. The key tension is whether the housing market recovery will materialize as expected; if rates stay high, HD could face continued pressure, but any easing could unlock significant upside.
Bullish
- Revenue Growth Rebound: Q1 FY2026 revenue grew 4.8% YoY to $41.765B, reversing prior declines and signaling demand recovery. This is the first positive growth quarter after several quarters of contraction, supported by strength in Building Materials ($12.971B) and Décor ($12.605B).
- Strong Free Cash Flow: TTM FCF stands at $14.315B, providing ample coverage for dividends and debt. Q1 FCF of $5.188B demonstrates robust cash generation, supporting the 2.44% dividend yield and share buybacks.
- Analyst Consensus Buy: With 32 analysts, the consensus is Buy (mean rating 1.94) and average target $370.34, implying 5.95% upside. The high target of $430 suggests 23% upside if housing recovers, reflecting optimism on professional segment growth.
- Valuation Below Historical Norms: PS ratio of 2.28 is significantly below the historical average of 8-10, indicating potential undervaluation on a sales basis. Forward PE of 21.69 is below the trailing 26.50, implying expected earnings growth of ~18%.
Bearish
- High Debt-to-Equity: Debt-to-equity ratio of 5.10 is elevated, reflecting significant leverage from acquisitions and share buybacks. While FCF covers interest, rising rates could increase interest expense (Q1 interest expense was $611M).
- Margin Compression: Operating margin declined to 11.93% in Q1 FY2026 from 14.48% in Q2 FY2025, and net margin fell to 7.88% from 10.05%. Rising costs and promotional activity are pressuring profitability.
- Underperformance vs Market: HD is down 9.6% over the past year while the S&P 500 gained 21.5%, a relative underperformance of 31.1%. This reflects persistent housing market weakness and high interest rates.
- Housing Market Headwinds: The Fed's steady rates and hawkish tilt continue to pressure the housing market, directly impacting HD's core business. Recent news highlights that elevated mortgage rates are suppressing home improvement demand.
HD Technical Analysis
The prevailing price trend for Home Depot is a recovery from a significant downtrend, with the stock currently trading at $349.52, down 9.6% over the past year but up 10.1% over the last three months. The stock sits at 62% of its 52-week range (between $289.10 low and $426.75 high), indicating it has rebounded from the lows but remains well below its highs, suggesting a mix of value opportunity and lingering bearish sentiment. The 1-year price change of -9.64% contrasts sharply with the S&P 500's +21.46% gain, highlighting Home Depot's underperformance relative to the broader market, while the 3-month relative strength of +5.91% shows recent outperformance.
Beta
0.96
0.96x market volatility
Max Drawdown
-29.7%
Largest decline past year
52-Week Range
$289-$427
Price range past year
Annual Return
-9.6%
Cumulative gain past year
| Period | HD Return | S&P 500 |
|---|---|---|
| 1m | +2.2% | +2.4% |
| 3m | +13.0% | +4.7% |
| 6m | -10.2% | +11.7% |
| 1y | -9.6% | +21.3% |
| ytd | +1.4% | +13.4% |
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HD Fundamental Analysis
Home Depot's revenue trajectory is showing a rebound, with the most recent quarter (Q1 FY2026, ending May 3, 2026) reporting revenue of $41.765 billion, a 4.79% year-over-year increase, reversing the declines seen in prior quarters. The multi-quarter trend shows revenue fluctuating: Q2 FY2025 revenue was $45.277 billion, Q3 FY2025 was $41.352 billion, Q4 FY2025 was $38.198 billion, and Q1 FY2026 at $41.765 billion, indicating a sequential recovery. Segment data reveals Building Materials as the largest segment at $12.971 billion, followed by Décor at $12.605 billion and Hardlines at $12.187 billion, with 'Other' contributing $4.002 billion, suggesting balanced growth across product lines. The company's profitability remains solid, with Q1 FY2026 net income of $3.289 billion and a net margin of 7.88%, though this is down from the 10.05% net margin in Q2 FY2025, reflecting margin compression. Gross margin was 33.0% in Q1 FY2026, slightly down from 33.4% in Q2 FY2025, while operating margin declined to 11.93% from 14.48% in the same period, indicating rising costs. The balance sheet shows a high debt-to-equity ratio of 5.10, but the company generated strong free cash flow of $5.188 billion in Q1 FY2026, with a trailing twelve-month FCF of $14.315 billion, providing ample coverage for dividends and debt obligations.
Quarterly Revenue
$41.8B
2026-05
Revenue YoY Growth
+4.8%
YoY Comparison
Gross Margin
33.0%
Latest Quarter
Free Cash Flow
$14.3B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HD Overvalued?
Given that Home Depot is profitable with a trailing net income of $3.289 billion in the latest quarter, the primary valuation metric selected is the price-to-earnings (PE) ratio. The trailing PE is 26.50, while the forward PE is 21.69, indicating the market expects earnings growth, which is supported by the estimated EPS of $19.81 for the next fiscal year. The gap between trailing and forward PE suggests a 18.1% expected earnings growth, aligning with the company's recovery narrative. Compared to the industry average, Home Depot's PE of 26.50 is at a premium to the sector's typical multiple, but this is justified by its dominant market position and consistent profitability. Historically, Home Depot's PE has ranged from as low as 15.11 in Q2 2022 to as high as 36.50 in Q4 2025, with the current 26.50 sitting near the middle of this band, suggesting the stock is fairly valued relative to its own history. The PS ratio of 2.28 is significantly lower than the historical average of around 8-10, indicating that on a sales basis, the stock is trading at a discount to its past valuation, which could signal an undervaluation opportunity.
PE
26.5x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 15x~37x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks include a high debt-to-equity ratio of 5.10, which amplifies exposure to rising interest rates; Q1 interest expense was $611M, and further rate hikes could squeeze margins. Margin compression is evident with operating margin down to 11.93% from 14.48% a year ago, and net margin at 7.88% vs 10.05%, indicating cost pressures that could persist. However, strong FCF of $14.315B TTM provides a cushion, but any significant downturn could strain debt servicing.