Home Depot Inc. (NYSE:HD)

The financial data reveals several important trends regarding operational performance, capital efficiency, and economic value generation over the six-year period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates an overall increasing trend from 12,860 million US dollars in early 2020 to a peak of 18,170 million in early 2023. Despite this growth, there is a noticeable decline to 16,384 million in early 2024, followed by a slight recovery to 16,730 million in early 2025. This pattern indicates strong profitability growth initially, with some recent softness possibly signaling operational challenges or margin pressures in the latest periods.

Cost of Capital

The cost of capital hovers in a fairly narrow band between 13.07% and 13.79% over the period, showing a slight upward trend until early 2024, where it peaks at 13.79%, before easing moderately to 13.50% in early 2025. This gradual increase suggests a modest rise in the company’s risk profile or capital market conditions, which could influence investment and valuation decisions.

Invested Capital

Invested capital exhibits significant growth, rising sharply from 36,678 million US dollars in early 2020 to 72,841 million by early 2025. Although there was a minor dip between early 2021 and early 2022, the overall upward trajectory indicates expanding asset or capital base employed in the business. This growth could be from acquisitions, increased working capital, or capital expenditures, reflecting the company's scaling activities or strategic investments.

Economic Profit

Economic profit shows a fluctuating pattern, starting at 8,065 million US dollars in early 2020, declining slightly in 2021, then increasing markedly to 11,590 million in early 2022. After peaking in early 2022, it decreases steadily through early 2025 to 6,893 million. This decline in economic profit in the last few years—despite the growth in invested capital—may highlight diminishing returns on capital or challenges in generating value above the cost of capital, suggesting that the recent investments are less efficient or that profitability pressures are increasing.

In summary, while operational profitability (NOPAT) grew substantially early in the period, recent declines and diminishing economic profit highlights a potential erosion of value creation efficiency. The cost of capital remains relatively stable with a slight increase, and the invested capital base has expanded significantly, pointing to increased scale but possibly lower capital efficiency. These patterns suggest the need for strategic focus on improving returns on the invested capital to sustain long-term economic profitability.

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.

Economic Profit

The economic profit demonstrates a fluctuating trend over the examined periods. Starting at $8,065 million in 2020, it decreased slightly to $7,410 million in 2021. It then rose significantly, reaching a peak of $11,590 million in 2022 before declining in subsequent years to $6,893 million by 2025. This indicates variability in profitability, with a notable peak followed by a downward trend in the latter years.

Invested Capital

Invested capital shows a generally increasing trajectory from 2020 to 2025. Beginning at $36,678 million in 2020, it rose sharply to $49,973 million in 2021, dipped slightly to $48,299 million in 2022, then increased steadily through 2023 and 2024, reaching $72,841 million in 2025. This upward movement suggests growing capital deployment by the company over time.

Economic Spread Ratio

The economic spread ratio, reflecting the efficiency of capital use, experienced considerable variation. It started at 21.99% in 2020, decreased to 14.83% in 2021, then climbed to 24% in 2022, marking the highest spread. Afterwards, the ratio declined to 9.46% by 2025, indicating diminishing returns relative to invested capital in the most recent period.

Overall Insights

The data reveals a scenario where invested capital increased consistently, but the economic profit and spread ratio both peaked mid-period before declining. This combination suggests that while the company expanded its capital base, the efficiency and profitability derived from that capital lessened over time, particularly in the last two years. This may point to challenges in maintaining return levels amidst increased investment or changing market conditions impacting profitability and capital utilization.

Adjusted Net Sales

Adjusted net sales exhibited a consistent upward trend from 2020 to 2025. Starting at approximately 110.6 billion US dollars in 2020, sales increased annually, reaching about 159.4 billion US dollars by 2025. Despite a slight dip in 2024 compared to the previous year, the overall growth trajectory remained positive over the six-year period.

Economic Profit

The economic profit demonstrated a fluctuating pattern over the analyzed timeframe. It increased from 8.1 billion US dollars in 2020 to a peak of 11.6 billion US dollars in 2022, followed by a decline in subsequent years. By 2025, economic profit had decreased to approximately 6.9 billion US dollars, showing a notable contraction relative to earlier periods despite the rise in net sales.

Economic Profit Margin

The economic profit margin, representing economic profit as a percentage of adjusted net sales, showed a general declining trend. It started at 7.29% in 2020, experienced a dip to 5.58% in 2021, then recovered somewhat to 7.63% in 2022. From 2023 onward, the margin decreased steadily to 4.33% in 2025. This decline indicates that the company’s efficiency in converting sales into economic profit weakened over the latter years despite increasing sales figures.

Overall Insights

The data reveals that although adjusted net sales grew continuously, economic profit and its margin did not follow the same positive trajectory. The peak in economic profit in 2022 suggests that factors beyond sales volume influenced profitability, possibly including increased costs or investments. The declining economic profit margin in recent years points to diminishing returns on sales, signaling potential operational or competitive challenges affecting profit generation efficiency.