Home Depot Inc. (NYSE:HD)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows an overall upward trend from 2020 to 2023, increasing from 12,860 million USD in 2020 to a peak of 18,170 million USD in 2023. However, in the last two years, it declined to 16,384 million USD in 2024 and slightly rebounded to 16,730 million USD in 2025. This pattern indicates growth in operating profitability until 2023, followed by a moderate downturn.

Cost of Capital

The cost of capital demonstrates minor fluctuations over the examined period, rising marginally from 13.08% in 2020 to a peak of 13.80% in 2024, before decreasing somewhat to 13.51% in 2025. This relative stability suggests consistent financing costs with slight variability, potentially influenced by changes in market conditions or risk assessments.

Invested Capital

Invested capital increased notably over the period, starting at 36,678 million USD in 2020 and rising to 72,841 million USD by 2025. Growth was steady with a small dip in 2022, followed by accelerated growth in the final years. This significant increase implies substantial investment in assets or working capital, potentially aimed at supporting the company’s operations and growth strategies.

Economic Profit

Economic profit exhibited an increase from 8,062 million USD in 2020 to a peak of 11,587 million USD in 2022, followed by a progressive decline to 6,887 million USD in 2025. Despite the increase in invested capital, economic profit diminished in recent years, which may indicate that returns on investments were not sufficient to cover the higher cost of capital or that the profitability of new investments was lower.

Summary

Overall, the data indicates that while operating profits increased through 2023, the company's economic profit has weakened since 2022. The significant growth in invested capital suggests aggressive asset expansion, but the declining economic profit trend implies a reduction in value creation relative to the cost of capital. The steady cost of capital with small fluctuations highlights a relatively stable financing environment. These patterns suggest caution in capital allocation effectiveness and a need to assess investment returns to enhance shareholder value.

Net Earnings

Net earnings exhibit an overall upward trend from the initial value of 11,242 million US dollars in the period ending February 2, 2020, reaching a peak of 17,105 million US dollars by January 29, 2023. However, after this peak, there is a noticeable decline, with net earnings decreasing to 15,143 million US dollars in January 28, 2024, and further slightly declining to 14,806 million US dollars by February 2, 2025.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows an increasing pattern from 12,860 million US dollars in the period ending February 2, 2020, to reach 18,170 million US dollars as of January 29, 2023. Following this peak, there is a decline in the subsequent period to 16,384 million US dollars in January 28, 2024. However, unlike net earnings, NOPAT recovers slightly in the most recent period, increasing to 16,730 million US dollars by February 2, 2025.

Comparative Insights

Both net earnings and NOPAT follow a similar trend characterized by growth up to the period ending early 2023, followed by a reduction. The decline in net earnings is more consistent in the last two periods, whereas NOPAT experiences a partial recovery in the final period. This divergence could indicate changes in operational efficiency or tax impacts that warrant further examination. Overall, the data suggests a phase of growth culminating around 2023, with some signs of financial pressure or transitional changes in profitability thereafter.

The financial data reveals the trends in provision for income taxes and cash operating taxes over six consecutive years.

Provision for Income Taxes

From February 2020 to January 2021, the provision for income taxes increased significantly from 3,473 million US dollars to 4,112 million, representing a notable rise. This upward trend continued into January 2022, peaking at 5,304 million US dollars. However, in the following years, the provision began to decline slightly: decreasing to 5,372 million in January 2023, then further reducing to 4,781 million in January 2024, and ending at 4,600 million in February 2025. Overall, after an initial sharp rise through 2022, the provision for income taxes demonstrated a downward adjustment over the last three years in the dataset.

Cash Operating Taxes

Cash operating taxes showed a strong upward movement from 3,573 million US dollars in February 2020 to 5,040 million in January 2021. This increase continued into January 2022 with another rise to 5,876 million. The following year, January 2023, registered a slight decrease to 5,622 million, which continued with marginal declines in subsequent years: 5,482 million in January 2024 and 5,201 million in February 2025. This pattern indicates that after reaching a peak in early 2022, cash operating taxes began to taper moderately but remained considerably higher than the initial 2020 values.

In summary, both provision for income taxes and cash operating taxes experienced significant growth from 2020 through early 2022, indicating increased tax-related expenses or obligations during this period. Post-2022, both metrics showed a gradual decline, potentially reflecting changes in taxable income, tax strategies, or regulatory impacts. The consistent higher levels from 2021 onwards compared to 2020 suggest an overall increase in tax burden or profitability subject to tax over the six-year span.

The financial data reveals several notable trends in the company’s capital structure and financial position over the observed periods.

Total reported debt & leases

This figure exhibits a consistent upward trend throughout the periods, increasing from $37,377 million in early 2020 to $62,290 million by early 2025. The rise indicates a growing reliance on debt and lease obligations, which increased by nearly 67% over the five-year span.

Stockholders’ equity (deficit)

Stockholders’ equity fluctuates significantly, starting with a negative position of -$3,116 million in early 2020 and improving to a positive $3,299 million by early 2021. However, it swings back to a negative figure in early 2022 at -$1,696 million, before gradually increasing again to reach $6,640 million by early 2025. This volatility suggests periods of financial strain or restructuring, followed by recovery phases, ultimately resulting in a strengthened equity base.

Invested capital

Invested capital shows an overall increasing pattern, beginning at $36,678 million in 2020, rising to $49,973 million in 2021, and experiencing some fluctuations before reaching a peak of $72,841 million in 2025. This growth reflects increased capital deployment, possibly through investments, acquisitions, or asset expansion aligning with the rise in debt levels.

In summary, the company appears to have expanded its capital base and debt load significantly over the period, while stockholders’ equity demonstrated volatility but ultimately improved. The overall increase in invested capital alongside growing debt indicates a strategy of leveraging to finance growth or operations, which has enhanced the total resources employed in the business.

The analysis of the economic profit, invested capital, and economic spread ratio over the six-year period reveals several notable trends and insights concerning the financial performance and capital efficiency.

Economic Profit

The economic profit experienced fluctuations throughout the period. It started at US$8,062 million in 2020, decreased slightly to US$7,406 million in 2021, then surged to a peak of US$11,587 million in 2022. Following this peak, economic profit declined steadily to US$10,752 million in 2023, US$8,674 million in 2024, and further down to US$6,887 million in 2025. This pattern indicates a period of strong profitability increase around 2022, followed by a consistent downturn in subsequent years.

Invested Capital

The invested capital showed a general upward trend over the years. It started at US$36,678 million in 2020 and rose sharply to US$49,973 million in 2021. Although there was a minor decline to US$48,299 million in 2022, the upward trajectory resumed thereafter, reaching US$55,111 million in 2023 and US$55,884 million in 2024, before increasing significantly to US$72,841 million in 2025. This rising trend suggests increased asset base or capital deployment by the company over time.

Economic Spread Ratio

The economic spread ratio, reflecting the return on invested capital relative to the cost of capital, demonstrated considerable volatility. The ratio started high at 21.98% in 2020, dropped markedly to 14.82% in 2021, then rebounded to 23.99% in 2022, the highest point in the period. Subsequently, there was a consistent decline to 19.51% in 2023, 15.52% in 2024, and finally down to 9.46% in 2025. This signals that although the company achieved strong returns relative to its capital cost around 2022, its efficiency in generating economic value over and above the cost of capital has weakened significantly by 2025.

In summary, while economic profit peaked in 2022, the subsequent years showed a downward trend in profitability despite rising invested capital. The increasing capital deployment has not translated into proportional economic gains, as evidenced by the declining economic spread ratio. This suggests increasing challenges in maintaining capital efficiency and generating economic profit relative to investment cost in recent years.

Economic Profit

The economic profit exhibited fluctuations over the analyzed periods. It initially decreased from 8,062 million USD in early 2020 to 7,406 million USD in early 2021. This was followed by a significant increase to 11,587 million USD in early 2022. Subsequently, the economic profit declined again to 10,752 million USD in early 2023, further decreasing to 8,674 million USD in early 2024, and reaching its lowest point of 6,887 million USD by early 2025. Overall, the trend indicates volatility with a peak around the 2022 fiscal year and a consistent downward trajectory thereafter.

Adjusted Net Sales

Adjusted net sales consistently increased throughout the periods under review. Starting at 110,559 million USD in early 2020, sales rose steadily to 132,817 million USD in early 2021 and continued this upward trend reaching 151,930 million USD in early 2022. Growth persisted, albeit at a slower pace, reaching 156,871 million USD in early 2023. A slight decline to 152,367 million USD occurred in early 2024, but sales rebounded to a new high of 159,362 million USD by early 2025. This overall positive trajectory demonstrates resilience and expansion in revenue generation despite some minor fluctuations.

Economic Profit Margin

The economic profit margin showed a downward trend over the examined timeline. Beginning at 7.29% in early 2020, it dropped to 5.58% in early 2021 before recovering somewhat to 7.63% in early 2022. After this brief increase, the margin experienced a progressive decline: 6.85% in early 2023, 5.69% in early 2024, and finally, dropping to 4.32% in early 2025. This suggests decreasing efficiency or a reduction in the proportion of economic profit relative to net sales, highlighting potential cost pressures or margin compression.

Overall Insights

While net sales have shown consistent growth with minor setbacks, economic profit and economic profit margin have demonstrated volatility and an overall declining pattern in the latter years. The decoupling of increasing sales and declining profitability metrics indicates challenges in maintaining profitability proportional to sales growth. This could point to rising costs, competitive pressures, or shifts in pricing strategies affecting the economic profit realized from sales revenue.