HD
The Home Depot, Inc.
Consumer Cyclical · Home Improvement Retail · United States · Stock
Score Breakdown
Scored for Dividend Income profile
Sub-scores are 0–20 each; Model Score is weighted by your selected investment goal. How it works →
Why Ranked Here
- Solid profitability metrics including a 12.7% operating margin and 13.5% return on assets provide a meaningful score contribution, but are offset by declining net income and EPS.
- Elevated leverage at a debt-to-equity ratio of 3.86 and deteriorating quarterly momentum through Q3 and Q4 weigh on the financial health and momentum scores.
- The absence of any macro theme assignment means the company received no theme-based score contribution, limiting the total composite score.
Why Not Higher
- Bottom-line contraction — net income down 4.4% and EPS down 4.6% — alongside a high payout ratio of 64.7% and heavy leverage of 3.86 debt-to-equity constrain both the growth and financial health scores.
- The company is not assigned to any of the 24 tracked macro themes, leaving a full scoring category at zero and capping the total composite score.
Data Confidence
10 / 10
Very High — full data coverage
Why This Score
Grounded in figures from this company's SEC EDGAR filings — not a restatement of the score itself.
Revenue grew modestly from FY2025 to FY2026, rising +3.2% to $164,683,000,000, but net income declined -4.4% and diluted EPS fell -4.6% over the same period, from $14.91 to $14.23.
The model rewarded the modest top-line expansion but penalized the contraction in bottom-line profitability; when earnings and EPS decline even as revenue grows, the overall growth score is pulled down significantly.
In FY2026, Home Depot posted a net margin of 8.6%, an operating margin of 12.7%, and a return on assets of 13.5%, reflecting solid earnings efficiency relative to both revenue and asset base.
The model rewarded these healthy margin and return figures; double-digit operating margins and a return on assets above 13% are characteristic of well-run large-scale retailers, supporting a strong but not maximum profitability score.
In FY2026, Home Depot carried a debt-to-equity ratio of 3.86 against total assets of $105,095,000,000, indicating a heavily leveraged balance sheet relative to equity.
The model likely applied a moderate score reflecting the tension between the company's large asset base and its elevated leverage; a debt-to-equity ratio of 3.86 signals meaningful financial risk even for a large-cap retailer, which constrains the financial health score.
Over the last four quarters, revenue peaked in 2026Q2 at $45,277,000,000 before declining to $41,352,000,000 in 2026Q3 and $38,198,000,000 in 2026Q4; net income and operating income followed the same arc, with net income falling from $4,551,000,000 in 2026Q2 to $2,571,000,000 in 2026Q4 and operating income dropping from $6,555,000,000 in 2026Q2 to $3,849,000,000 in 2026Q4.
The model penalized the clear deceleration trend across the final two quarters of the period; while Q2 showed strong results, the sequential declines in revenue, net income, and operating income through Q3 and Q4 signal weakening near-term momentum.
Home Depot has grown its dividends per share consistently from $7.60 in FY2023 to $8.36 in FY2024, $9.00 in FY2025, and $9.20 in FY2026, while the dividend payout ratio stood at 64.7% of net income in FY2026.
The model credited the unbroken multi-year dividend growth streak, but the relatively high payout ratio of 64.7% in FY2026 limits upside in the score by signaling less retained earnings headroom and potential sustainability risk if earnings were to decline further.
Home Depot is not currently assigned to any of the 24 tracked macro themes in the model.
The absence of a macro theme assignment means the security did not receive any theme-based score contribution under the current methodology; this reflects the model's current classification state and is not an indicator of the company's business quality.
Research Summary
AI-generated analysis reflects data and conditions as of the report date shown above. Verify any specific figures through primary sources before acting on this analysis.
Home Depot posted modest top-line growth of 3.2% in FY2026, reaching $164.7 billion in revenue, but bottom-line results weakened as net income fell 4.4% and diluted EPS declined from $14.91 to $14.23. Profitability metrics remain solid, with a 12.7% operating margin and 13.5% return on assets, though the balance sheet carries meaningful leverage at a debt-to-equity ratio of 3.86. Quarterly momentum deteriorated through the back half of the fiscal year, with revenue and earnings declining sequentially from a Q2 peak, and the company's absence from any tracked macro theme leaves a portion of the model's scoring framework untapped. Overall, the company scores 47.3 out of 100, earning a Medium risk rating and a Research Further label.
Plain English
Home Depot is a large, profitable retailer that grew sales slightly last year but actually made less money overall, carries a lot of debt, and saw its quarterly results slow down toward year-end — making it a mixed picture worth digging into before drawing conclusions.
Bull Case vs. Bear Case
Bull Case
- Home Depot maintains strong operational efficiency, with a 12.7% operating margin and a 13.5% return on assets in FY2026, characteristic of a well-run large-scale retailer.
- The company has grown its dividend per share every year from $7.60 in FY2023 to $9.20 in FY2026, demonstrating a consistent multi-year commitment to returning capital to shareholders.
- Revenue expanded 3.2% year-over-year to $164.7 billion in FY2026, showing the business continues to grow its top line even in a challenging environment.
Bear Case
- Net income fell 4.4% and diluted EPS dropped from $14.91 to $14.23 in FY2026, meaning profitability is eroding even as revenue grows.
- The debt-to-equity ratio of 3.86 signals a heavily leveraged balance sheet, which introduces meaningful financial risk and constrains the company's financial flexibility.
- Quarterly momentum deteriorated sharply after Q2, with revenue falling from $45.3 billion to $38.2 billion and net income dropping from $4.6 billion to $2.6 billion by Q4, signaling weakening near-term trends.
What Could Change the Picture
Bullish Triggers
- A sustained recovery in quarterly earnings and operating income — reversing the Q3 and Q4 declines — would signal that the profitability erosion is temporary rather than structural.
- A meaningful reduction in leverage from the current debt-to-equity ratio of 3.86 would improve financial health and reduce balance sheet risk, potentially lifting the overall assessment.
Bearish Triggers
- If the dividend payout ratio of 64.7% rises further due to continued net income declines, dividend sustainability could come into question and signal deeper earnings stress.
- Continued sequential quarterly revenue and earnings declines beyond Q4 would confirm that the deceleration trend is worsening rather than stabilizing.
Risk Profile
Medium RiskHome Depot's debt-to-equity ratio of 3.86 against a $105.1 billion asset base reflects a heavily leveraged balance sheet that introduces meaningful financial risk. Compounding this, quarterly results deteriorated through the second half of FY2026, with net income falling from $4.6 billion in Q2 to $2.6 billion in Q4, suggesting near-term earnings pressure that could strain debt serviceability if the trend continues.
This report is for educational and research purposes only. It does not constitute financial, investment, legal, or tax advice — always conduct your own due diligence before making investment decisions.