HOME DEPOT, INC. (HD): what the price assumes

In the published model solve dated 2026-Q2, anchored at $330.20, HOME DEPOT, INC. (HD) is priced for +7.2% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-08-06.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/HD

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.2% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.

Per-Model Detail (n=13)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Home Depot is extending beyond store-based home improvement into complex Pro procurement, and its filing says digital tools are built for Pros "including those working on complex projects".
• The largest risk remains housing-sensitive demand because the 10-K says "Our financial performance depends significantly on the stability of the housing and home improvement markets" while the price requires five years of faster operating-profit growth.
• The next hard test arrives with fiscal Q2 results on August 18, 2026, when comparable sales, operating margin and integration progress can be measured against the full-year outlook.

Bull Case

Housing affordability and muted project demand are the obvious objections to owning Home Depot. The latest operating evidence does not remove that risk, but it makes a prolonged retreat harder to assume. The first-quarter filing states that "Net sales for the first quarter of fiscal 2026 were $41.8 billion", up 4.8% from the prior year, while "comparable sales for the first quarter of fiscal 2026 increased 0.6%". Acquisitions supplied much of the difference, yet the core business still grew slightly in a difficult housing backdrop. That is a sturdier starting point than the macro story alone suggests.

The stronger bull argument is that Home Depot is turning a collection of stores and distributors into one operating system for professional customers. The 10-K says its mobile applications and digital tools "can also help serve the needs of Pros, including those working on complex projects". SRS adds roofing, building products, landscape and pool distribution, and the filing says SRS acquired GMS to pursue a "leading, multi-category building materials distributor". This expands the relationship from a remodeler's shopping trip to the purchasing, delivery and trade-credit workflow of a larger job. The benefit is not merely more products. It is a greater share of each project.

The first quarter also showed how the mix is changing: Home Depot's retail operations remain the profit engine, while SRS and GMS broaden the revenue base and deepen access to complex Pro work. A share count declining about 0.9% annually over the four years through May 3, 2026 means each remaining share participates in more of that system. The bull case is therefore less dependent on an immediate housing rebound than it first appears. It requires Home Depot to convert its Pro distribution reach into durable operating-profit growth, and the early sales evidence supports that route without yet proving the five-year outcome priced into the shares.

Bear Case

The narrative dependency is simple: today's price requires operating income to grow about 10.2% a year for five years, a pace slightly above Home Depot's recent average. Management's fiscal 2026 outlook calls for total sales growth of 2.5% to 4.5% and an operating margin of 12.4% to 12.6%. Those ranges leave much of the required operating-profit growth for later years, a stronger revenue recovery, or future margin expansion. Only a little over half of comparable fast-growers sustained a similar pace for roughly five years. The bet is plausible, but it is not forgiving.

Housing is the first dependency. The 10-K says "Our financial performance depends significantly on the stability of the housing and home improvement markets", and first-quarter comparable sales rose only 0.6%. A business can gain distribution breadth while households still defer kitchens, flooring and other large discretionary projects. At the same time, "Prices of certain commodity products, including lumber and other raw materials, are historically volatile", which can move ticket size and gross profit without signaling healthier unit demand. Revenue growth bought through acquisitions is useful, but it does not by itself establish that the existing store base can compound operating income at the rate embedded in the price.

Execution adds a second dependency. Home Depot describes competitors that range from "traditional brick-and-mortar, to multichannel, to exclusively online", and its own filing warns, "We cannot guarantee that our current or future fulfillment options will be maintained and implemented successfully". The Pro strategy asks stores, SRS, GMS, HD Supply, digital tools and delivery assets to behave like one network. If the integration produces organizational complexity faster than customer loyalty, the market will have paid for coordination before it appears in operating profit.

The balance sheet reduces the room for a slow conversion. Net debt is $56.1 billion, equal to about 2.7 times operating income over the reconstructed four-quarter period through May 3, 2026, although that period's operating profit still covered interest about 8.6 times. This is manageable rather than fragile. It is also substantial enough that a miss on the revenue-and-margin path would reach equity holders more directly than it would at a net-cash company.

Valuation

At $353.23, the market is paying for operating income to grow about 10.2% a year for five years. The starting base is $20.7 billion of operating income over the reconstructed four-quarter period through May 3, 2026, and the first-quarter filing reports that "Net sales for the first quarter of fiscal 2026 were $41.8 billion". The required growth rate sits modestly above Home Depot's recent average, while the real demand is persistence: the business must keep compounding through a housing cycle, integration work and normal competitive pressure.

The valuation methods are consistently more restrained than the share price. The cash-flow and forward-growth methods center well below the market, while the earnings-power methods collectively sit lower still. The exit-multiple cash-flow method gets closest because it assumes today's 14.9 times EV/EBITDA relationship still applies at the end of year five. That makes growth and duration do the work. A single retail multiple is not a sound substitute because the operating scope now includes a distinct distribution business; the quarterly filing says "As of May 3, 2026, SRS was organized as four lines of business". The supported valuation read therefore rests on consolidated cash generation and does not assign one blanket multiple across retail and specialty distribution.

The balance sheet sets the downside conditions. The 10-K reported "At February 1, 2026, we had $1.4 billion in cash and cash equivalents"; the current packet carries $56.1 billion of net debt, with operating profit covering interest roughly 8.6 times. Shares outstanding declined about 0.9% annually from May 2022 through May 2026, so capital return is visible in the per-share base. Gross profit also remained substantial in the latest quarter: "Gross profit for the first quarter of fiscal 2026 increased 2.4% to $13.8 billion". The current price combines a durable operating base with a five-year growth requirement that is achievable only if Pro expansion and core home-improvement demand convert into profit together.

Catalysts

The nearest information event is Home Depot's fiscal Q2 earnings release on August 18, 2026, at 9:00 a.m. ET. The useful test is whether comparable sales can improve from the modest first-quarter pace while the company preserves its fiscal 2026 operating-margin guidance of 12.4% to 12.6%. Management also reaffirmed full-year total sales growth of 2.5% to 4.5% and comparable sales growth from flat to 2.0%. That print will show whether acquisition-led growth is being joined by healthier demand in the existing store base.

A July 30 organizational realignment is the next execution marker. Home Depot unified leadership across merchandising, loyalty, financial services, Pro and technology, and created an Office of Pro Acceleration to coordinate Home Depot Pro, HD Supply, SRS and Construction Resources. The company described a Pro addressable market of about $700 billion and an operating network of more than 2,360 stores, 1,300 branches, 325 customer-facing warehouses and roughly 16,000 delivery assets in that release. Subsequent disclosures should reveal whether the reorganization simplifies cross-selling and fulfillment or merely adds another management layer.

SRS completed its acquisition of Mingledorff's on May 11, adding 42 HVAC distribution locations across five southeastern states and a new vertical that Home Depot sizes at about $100 billion. Financial terms were not disclosed. The catalyst is operational: evidence of cross-selling, coordinated fulfillment and profitable growth in SRS would support the Pro thesis, while rising distribution revenue without corresponding operating leverage would weaken it.

Peer Cohorts (Per Segment, With Filing Citations)

Primary segment (US/Canada/Mexico retail) (reported)

• LOW (LOWE’S COMPANIES, INC.)
• FY2025 10-K: …the fair value hierarchy. When quoted prices in active markets were not available, fair values for financial assets and liabilities classified within Level 2 were determined using pricing models, and the inputs to those pricing models were based on observable market inputs. The inputs to the pricing models were…
• FY2025 10-K: …for prior periods have been reclassified to conform to the current year presentation. 1 Home Decor includes the following product categories: Appliances, Décor, Flooring, Kitchens & Bath, and Paint 2 Building Products includes the following product categories: Building Materials, Electrical, Lumber, Millwork, and…
• TSCO (TRACTOR SUPPLY CO /DE/)
• FY2025 10-K: …retail stores). Given the size of the communities that we target, we believe there is ample opportunity for new store growth in many existing and new markets. We believe we have developed a proven method for selecting store sites and have significant additional opportunities for new Tractor Supply stores. We also…
• FY2025 10-K: …distribution facilities to retail stores, from one distribution facility to another, and directly to our customers; tariffs on imported products; vendor support; damaged, junked or defective product; cash discounts from payments to merchandise vendors; and adjustments for shrinkage (physical inventory losses), lower…
• FND (Floor & Decor Holdings, Inc.)
• FY2025 10-K: …0001507079 false FY 2025 P3D P5D P2Y P3Y http://fasb.org/us-gaap/2025#AccountsPayableCurrent http://fasb.org/us-gaap/2025#AccountsPayableCurrent iso4217:USD xbrli:shares iso4217:USD xbrli:shares fnd:store utr:sqft fnd:design_studio fnd:state fnd:distribution_center fnd:reporting_unit xbrli:pure fnd:segment fnd:class…
• FY2025 10-K: …We employ experienced designers in all of our stores to provide free design consulting. Additionally, we provide a robust online experience for potential customers on our website. Extensive Service Offerings to Enhance the Pro Customer Experience. We provide an efficient one-stop shopping experience for our Pro…
• WSM (WILLIAMS-SONOMA, INC.)
• FY2025 10-K: -fulfillment hubs. Our vision is to own the home, and the places where our customers work, stay and play. Our products in our portfolio of nine brands - Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow - are marketed…
• FY2025 10-K: …of the additional week, decreased $39.1 million or 0.5%, with company comp decline of 1.6%. This decrease was driven by customer hesitancy towards furniture purchases, partially offset by strength in our non-furniture and seasonal assortments. From a channel perspective, the company comp decline of 1.6% was driven by…
• RH (RH)
• FY2025 10-K: …charge of $ 35 million recognized in prior fiscal years. (3) The Waterworks segment balance represents membership interests in two European entities, whereby we hold a 50 percent membership interest in one entity and an approximately 25 percent membership interest in the other, and we are not the primary beneficiary…
• FY2025 10-K: …based on the number of days a retail location was opened during the period divided by the total number of days in the period, and were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED ​ ​ FEBRUARY 1, FEBRUARY 3, ​ ​ ​ 2025 ​ 2024 ​ ​ (in thousands) Weighted-average square footage ​ ​ ​ 2,007 ​ 1,796 Weighted-average…
• DKS (DICK'S Sporting Goods, Inc.)
• FY2025 10-K: …0001089063 2024 FY FALSE P3Y http://fasb.org/us-gaap/2024#AccountsPayableCurrent http://fasb.org/us-gaap/2024#CostOfGoodsAndServicesSold http://fasb.org/us-gaap/2024#SellingGeneralAndAdministrativeExpense http://fasb.org/us-gaap/2024#SellingGeneralAndAdministrativeExpense 3 P5Y iso4217:USD xbrli:shares iso4217:USD…
• FY2025 10-K: …omni-channel experience which includes buy-online, pick-up in store, curbside pickup and return, and same-day delivery capabilities with Instacart or DoorDash. Seasonality Our business is subject to seasonal influences, including the success of the holiday selling season and the impact of unseasonable weather…

Other (SRS non-reportable specialty trade distribution) (reported)

• BLDR (Builders FirstSource, Inc.)
• FY2025 10-K: …and expenses during the reporting period. Actual results could materially differ from those estimates. Estimates are used when accounting for items such as revenue, vendor rebates, allowance for returns, discounts and credit losses, employee compensation programs, depreciation and amortization periods, income taxes,…
• FY2025 10-K: …other long-term liabilities as of December 31, 2025, and 2024, respectively. Included in these reserve balances as of December 31, 2025, and 2024, were $ 25.9 million and $ 17.1 million , respectively, of claims that exceeded stop-loss limits and are expected to be recovered under insurance policies which are also…
• FAST (FASTENAL CO)
• FY2025 10-K: …to, economic downturns (including economic downturns as a result of global pandemics), weakness in the manufacturing or commercial construction industries or any of our end markets, competitive pressure on selling prices, changes in trade policies or tariffs, changes in our current mix of products, customers, or…
• FY2025 10-K: …customers engaged in a wide range of activities, none of which individually constitute 10% of sales. This includes non-residential construction, reseller, transportation, warehouse and storage, data centers, and g overnment/education customers. Our construction end market experienced growth starting in the second…
• WCC (WESCO International, Inc.)
• FY2025 10-K: …EBITDA by net sales. 35 Table of Contents The following tables reconcile SG&A expenses, income from operations, other non-operating (income) expense, provision for income taxes, net income attributable to common stockholders, and earnings per diluted share to adjusted SG&A expenses, adjusted income from operations,…
• FY2025 10-K: …the reportable segment information for the year ended December 31, 2024 for the EES and CSS reportable segments has been recast to conform to the current year presentation. (2) The reportable segments do not incur income taxes and interest expense as these costs are centrally controlled through the Corporate tax and…
• CNM (Core & Main, Inc.)
• FY2025 10-K: …110,644 - - - 1 - - - 1 Forfeiture of Class A Shares and Partnership Interests ( 20 ) - ( 34,703 ) - - - - - - Non-controlling interests adjustment for purchase of Partnership Interests and vesting of Core & Main Holdings, LP Partnership Interests held by non-controlling interests - - - - ( 12 ) - - 12 - Balances at…
• FY2025 10-K: …the acquisition date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period that the amounts are determined. For each…
• SITE (SiteOne Landscape Supply, Inc.)
• FY2025 10-K: …to vest. Stock-based compensation expense for restricted stock units is measured based on the fair value of the Company's common stock on the grant date. The Company utilizes the Black-Scholes option pricing model to estimate the grant-date fair value of option awards. The exercise price of option awards is set to…
• FY2025 10-K: …earnings of the Company's foreign subsidiaries are approximately $ 24.6 million as of December 28, 2025. Those earnings are considered indefinitely reinvested; accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or…
• DNOW (DNOW INC.)
• FY2025 10-K: …contain various types of steel. The worldwide supply and demand for these products and other steel products that we do not supply, impact the pricing and availability of our products and, 36 ultimately, our sales and operating profitability. Additionally, supply chain disruptions with key manufacturers or in markets…
• FY2025 10-K: …the rates in effect on the transaction dates. For all operations, gains or losses from remeasuring foreign currency transactions into the reporting currency are included in other (expense) income. Net foreign currency transactions were a loss of $ 2 million , $ 1 million and $ 1 million for the years ended December…
• GWW (W.W. GRAINGER, INC.)
• FY2025 10-K: …profit sales that are eliminated within each segment to present only the impact of net sales to external customers. (2) Other segment items for HTSNA and EA consist of selling, general and administrative expenses primarily comprised of payroll and benefits, marketing expense, depreciation, amortization and non-cash…
• FY2025 10-K: …and market-specific factors. The Company's revenue is primarily comprised of MRO product sales and related activities. The Company's presentation of revenue by reportable segment and customer industry most reasonably depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.