Home Depot Inc. (NYSE:HD)

A significant increase in both goodwill and intangible assets is observed over the analyzed period. While goodwill remained relatively stable between 2021 and 2023, it experienced substantial growth in 2024 and continued to rise sharply through 2026. Similar trends are evident in customer relationships and trade names, though the increases are proportionally smaller than those seen in goodwill. Definite-lived intangible assets also demonstrate a consistent upward trajectory, driven by increases in the gross carrying amount and offset by growing accumulated amortization.

Goodwill

Goodwill exhibited a modest increase from US$7,126 million in 2021 to US$7,444 million in 2023. However, a substantial jump to US$8,455 million occurred in 2024, followed by dramatic increases to US$19,475 million in 2025 and US$22,344 million in 2026. This suggests significant acquisitions or revaluations contributing to the growth in goodwill during these later years.

Customer Relationships

Customer relationships showed a gradual increase from US$2,965 million in 2021 to US$3,425 million in 2024. This growth accelerated in 2025 and 2026, reaching US$8,845 million and US$10,517 million respectively. The pattern mirrors, though to a lesser extent, the growth observed in goodwill.

Trade Names

Trade names remained constant at US$151 million between 2021 and 2023. A notable increase to US$227 million occurred in 2024, with further growth to US$610 million in 2025 and US$889 million in 2026. While smaller in absolute value compared to goodwill and customer relationships, the percentage increase is substantial in the later years.

Definite-Lived Intangible Assets

The gross carrying amount of definite-lived intangible assets increased steadily from US$3,132 million in 2021 to US$3,664 million in 2024, and then accelerated to US$9,466 million in 2025 and US$11,407 million in 2026. Simultaneously, accumulated amortization increased from US$ -169 million in 2021 to US$ -1,727 million in 2026, indicating the ongoing consumption of the economic benefits associated with these assets. The net carrying amount of definite-lived intangible assets followed a similar pattern to the gross amount, increasing significantly in 2025 and 2026.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets, primarily comprised of trade names, remained constant at US$649 million throughout the entire period. This suggests no new indefinite-lived intangible assets were acquired or recognized, and no impairments were recorded.

Total Intangible Assets & Goodwill

The combined value of goodwill and other intangible assets increased from US$10,738 million in 2021 to US$32,673 million in 2026. This represents a significant portion of the company’s asset base and warrants further investigation into the underlying drivers of this growth, particularly the acquisitions or events leading to the substantial increases in goodwill, customer relationships, and trade names in 2024-2026.

The accelerated growth in intangible assets and goodwill in the later years of the period suggests a period of significant corporate activity, potentially involving acquisitions or strategic investments. Continued monitoring of these assets, particularly goodwill, is recommended to assess potential impairment risks.

An examination of the financial information reveals significant adjustments made to total assets and stockholders’ equity over the six-year period. These adjustments appear to be primarily related to the removal of goodwill and intangible assets from the reported figures, resulting in substantially lower adjusted values.

Total Assets

Reported total assets demonstrate a general upward trend, increasing from US$70,581 million in 2021 to US$105,095 million in 2026. However, the adjusted total assets, reflecting the removal of goodwill, exhibit a more moderate increase. The difference between reported and adjusted total assets widens considerably over time, escalating from US$7,126 million in 2021 to US$28,454 million in 2026. This suggests a growing amount of goodwill or intangible assets initially recognized, which are subsequently removed in the adjusted figures.

Stockholders’ Equity

Reported stockholders’ equity fluctuates considerably, beginning with a positive value of US$3,299 million in 2021, declining to a deficit of US$1,696 million in 2022, and then recovering to a positive US$12,813 million in 2026. Conversely, adjusted stockholders’ equity consistently shows a deficit throughout the period, deepening from US$3,827 million in 2021 to US$12,835 million in 2025 before slightly improving to a deficit of US$9,531 million in 2026. The divergence between reported and adjusted equity is substantial and increases over time, indicating that the removal of goodwill and related items significantly impacts the equity position.

The substantial differences between reported and adjusted figures highlight the impact of goodwill and intangible assets on the company’s financial position. The trend suggests an initial recognition of significant goodwill, followed by subsequent impairment or removal, leading to a considerable reduction in both reported assets and equity when adjusted. The increasing gap between the reported and adjusted values warrants further investigation into the nature and timing of these adjustments.

Trend Analysis

From 2021 to 2025, the adjustments consistently reduce both total assets and stockholders’ equity. While both reported values increase in 2026, the adjusted values continue to be significantly lower, indicating that the impact of removing goodwill remains substantial. The magnitude of the adjustments suggests that these items represent a material portion of the company’s initially reported financial position.

The consistent negative impact of the adjustments on stockholders’ equity raises concerns about the underlying assumptions used in valuing goodwill and intangible assets. A detailed review of the impairment policies and the rationale behind the adjustments is recommended.

The financial metrics demonstrate a consistent impact from adjusting for goodwill. Removing goodwill from the asset base generally results in improved asset turnover and return ratios. A review of the reported versus adjusted figures reveals a pattern of increasing divergence over the observed period.

Total Asset Turnover

Reported total asset turnover fluctuated between 1.87 and 2.10 from 2021 to 2023, then decreased to 1.99 in 2024 and further to 1.57 and 1.66 in 2025 and 2026 respectively. The adjusted total asset turnover consistently exceeded the reported figure, beginning at 2.08 in 2021 and declining to 1.99 in 2026. The difference between reported and adjusted turnover widens over time, indicating a growing proportion of assets are represented by goodwill.

Financial Leverage

Reported financial leverage experienced significant volatility, increasing from 21.39 in 2021 to 73.30 in 2024, before decreasing substantially to 14.48 in 2025 and 8.20 in 2026. Adjusted financial leverage figures are unavailable for comparison.

Return on Equity (ROE)

Reported ROE exhibited extreme fluctuations, starting at 390.00 in 2021, peaking at 1,450.48 in 2024, and then declining to 222.98 in 2025 and 110.48 in 2026. Adjusted ROE figures are unavailable for comparison.

Return on Assets (ROA)

Reported ROA decreased from 18.23 in 2021 to 13.47 in 2026. The adjusted ROA consistently exceeded the reported ROA, starting at 20.28 in 2021 and declining to 17.11 in 2026. The gap between reported and adjusted ROA also widened over the period, mirroring the trend observed in total asset turnover. This suggests that the inclusion of goodwill in the asset base significantly depresses the reported ROA.

The consistent difference between reported and adjusted ratios highlights the substantial impact of goodwill on the company’s financial performance as presented. The increasing divergence suggests that goodwill represents a growing portion of total assets, and its presence significantly alters the interpretation of key financial ratios. Further investigation into the nature and potential impairment of goodwill may be warranted.

An examination of the financial information reveals trends in both total asset values and associated turnover ratios over a six-year period. Reported total assets generally increased, while adjusted total assets demonstrate a more nuanced pattern. The reported and adjusted total asset turnover ratios both exhibit a declining trend, though at differing rates.

Reported Total Assets

Reported total assets increased from US$70,581 million in 2021 to US$76,530 million in 2024, representing a cumulative increase of approximately 8.4%. A more substantial increase is then observed, reaching US$96,119 million in 2025 and further growing to US$105,095 million in 2026. This suggests a period of accelerated asset accumulation in the later years of the observed timeframe.

Adjusted Total Assets

Adjusted total assets followed a similar upward trajectory, increasing from US$63,455 million in 2021 to US$68,075 million in 2024. The increase from 2024 to 2025 was significant, reaching US$76,644 million, and continued to US$82,751 million in 2026. The difference between reported and adjusted total assets widens over time, indicating a growing proportion of assets being classified as goodwill or intangible assets.

Reported Total Asset Turnover

The reported total asset turnover ratio decreased steadily from 1.87 in 2021 to 1.57 in 2026. This indicates a diminishing ability to generate sales revenue for each dollar of reported assets. The decline, while consistent, decelerates slightly between 2023 and 2024, and again between 2024 and 2025.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio also exhibited a downward trend, moving from 2.08 in 2021 to 1.99 in 2026. While also declining, the adjusted ratio consistently remained higher than the reported ratio throughout the period. The rate of decline appears to moderate in the later years, suggesting a potential stabilization of operational efficiency when considering assets excluding goodwill and intangibles. The difference between the reported and adjusted ratios suggests that the inclusion of goodwill and intangible assets in the reported total assets calculation has a suppressing effect on the overall turnover ratio.

In summary, the company experienced growth in total assets, particularly in the later years of the period. However, both reported and adjusted asset turnover ratios declined, indicating a decreasing efficiency in asset utilization. The divergence between the reported and adjusted turnover ratios highlights the impact of goodwill and intangible assets on the overall asset efficiency metric.

An examination of the financial information reveals significant fluctuations in reported and adjusted asset and equity values between January 31, 2021, and February 1, 2026. These shifts have a corresponding impact on calculated financial leverage ratios.

Total Assets

Reported total assets demonstrate a generally increasing trend over the period, rising from US$70,581 million in 2021 to US$105,095 million in 2026. However, growth appears to have accelerated significantly between 2023 and 2025. Adjusted total assets follow a similar pattern, increasing from US$63,455 million in 2021 to US$82,751 million in 2026, though the magnitude of the increase between 2023 and 2025 is less pronounced than that observed in the reported figures.

Stockholders’ Equity

Reported stockholders’ equity exhibits considerable volatility. Beginning at US$3,299 million in 2021, it declines to a deficit of US$1,696 million in 2022 before recovering to US$12,813 million in 2026. Adjusted stockholders’ equity consistently reflects a deficit throughout the period, deepening from US$3,827 million in 2021 to US$12,835 million in 2025, and then slightly improving to US$9,531 million in 2026. The divergence between reported and adjusted equity suggests a substantial impact from goodwill and intangible assets.

Financial Leverage

Reported financial leverage shows a dramatic increase from 21.39 in 2021 to 73.30 in 2024, before decreasing substantially to 8.20 in 2026. This fluctuation correlates with the changes in reported total assets and stockholders’ equity. The absence of a reported financial leverage ratio for 2022 is noted. Adjusted financial leverage values are not available for the entire period, but their calculation is implied by the provided asset and equity figures. The significant difference between reported and adjusted equity suggests that the inclusion or exclusion of goodwill and intangible assets has a material effect on the leverage ratio.

The substantial differences between reported and adjusted figures indicate that goodwill and intangible assets constitute a significant portion of the company’s reported assets and have a considerable influence on its financial leverage. The increasing trend in reported assets, coupled with the fluctuating equity position, warrants further investigation into the nature and valuation of these assets.

Reported stockholders’ equity demonstrates significant volatility over the observed period. Beginning at US$3,299 million in January 2021, it experienced a substantial decrease, resulting in a deficit of US$1,696 million in January 2022. A recovery followed, with equity increasing to US$1,562 million in January 2023 and further to US$1,044 million in January 2024. This upward trend continued, reaching US$6,640 million in February 2025 and culminating in US$12,813 million in February 2026.

In contrast, adjusted stockholders’ equity consistently reflects a deficit throughout the entire period. Starting at a deficit of US$3,827 million in January 2021, the deficit widened considerably to US$9,145 million in January 2022. While the deficit decreased to US$5,882 million in January 2023, it subsequently increased again, reaching US$7,411 million in January 2024, US$12,835 million in February 2025, and US$9,531 million in February 2026.

Reported Return on Equity (ROE)

Reported ROE exhibits extreme fluctuations. In January 2021, it was 390.00%. Following a period of unavailable information, ROE increased to 1,095.07% in January 2023, and further to 1,450.48% in January 2024. A substantial decline is then observed, with ROE decreasing to 222.98% in February 2025 and 110.48% in February 2026. These high values suggest a potentially small equity base relative to earnings, warranting further investigation into the components of both net income and equity.

Adjusted ROE values are not presented within the provided information. The absence of these figures limits a comprehensive comparative analysis between reported and adjusted performance. The significant divergence between reported and adjusted stockholders’ equity suggests that substantial adjustments are being made to reported equity, potentially related to goodwill, intangible assets, or other off-balance sheet items. The lack of adjusted ROE figures prevents an assessment of the impact of these adjustments on overall profitability.

The increasing trend in reported stockholders’ equity from January 2023 through February 2026 contrasts with the consistently negative adjusted stockholders’ equity. This discrepancy highlights the importance of understanding the nature and magnitude of the adjustments being made to arrive at the adjusted equity figure. Further analysis is needed to determine the sustainability of the reported equity growth and the underlying drivers of the adjustments.

The period under review demonstrates increasing total assets, both reported and adjusted, from 2021 through 2026. However, the rate of asset growth accelerates notably in 2025 and 2026. Return on Assets (ROA), both reported and adjusted, exhibits a general declining trend over the same timeframe, despite initial increases.

Total Assets

Reported total assets increased from US$70,581 million in 2021 to US$105,095 million in 2026, representing a cumulative growth of approximately 48.7%. Adjusted total assets followed a similar pattern, rising from US$63,455 million to US$82,751 million, a cumulative increase of roughly 30.4%. The most substantial year-over-year increases in both reported and adjusted assets occur between 2024 and 2025, and again between 2025 and 2026, suggesting a period of accelerated expansion.

Reported Return on Assets (ROA)

Reported ROA peaked at 22.86% in 2022, following an initial increase from 18.23% in 2021. Subsequently, it experienced a consistent decline, reaching 13.47% in 2026. This indicates diminishing profitability relative to the reported asset base over the period.

Adjusted Return on Assets (ROA)

Adjusted ROA mirrored the trend of reported ROA, reaching a high of 25.51% in 2022 after increasing from 20.28% in 2021. It then decreased steadily to 17.11% in 2026. The adjusted ROA consistently exceeded the reported ROA throughout the observed period, suggesting that the adjustments made to total assets positively impact profitability metrics. The rate of decline in adjusted ROA appears to moderate slightly in the final year of the period.

Relationship between Asset Growth and ROA

While assets grew significantly, the corresponding decline in both reported and adjusted ROA suggests that the returns generated from those assets are decreasing. This could be due to a variety of factors, including increased competition, changes in operational efficiency, or strategic investments that have not yet yielded substantial returns. The accelerated asset growth in 2025 and 2026, coupled with the continued ROA decline, warrants further investigation to determine the sustainability of this growth trajectory.