Home Depot Inc. (NYSE:HD)

Net operating profit after taxes (NOPAT)

The NOPAT shows an overall increasing trend from 12,860 million US$ in early 2020 to a peak of 18,170 million US$ in early 2023. However, there is a noticeable decline thereafter, decreasing to 16,384 million US$ in early 2024 before a modest recovery to 16,730 million US$ in early 2025. This pattern suggests strong growth in operating profitability until 2023, followed by some contraction and stabilization in the most recent periods.

Cost of capital

The cost of capital has remained relatively stable over the six-year period, fluctuating within a narrow range between approximately 13.08% and 13.80%. This indicates a consistent risk and capital pricing environment for the company without significant volatility.

Invested capital

Invested capital shows considerable growth from 36,678 million US$ in 2020 to 72,841 million US$ in 2025, nearly doubling in size over the period. Though there was a slight dip from 49,973 million US$ in 2021 to 48,299 million US$ in 2022, the overall trajectory is upward, reflecting ongoing investment and expansion activities within the company’s operations.

Economic profit

Economic profit exhibits a rising trend from 8,061 million US$ in 2020, peaking at 11,585 million US$ in 2022. Following this peak, there is a continuous decline through to 6,886 million US$ in 2025. This downward trend in economic profit despite growing invested capital suggests diminishing returns on the company’s new capital investments or increased capital costs affecting value creation.

Summary insights

Overall, the data reveals that while operating profitability (NOPAT) increased substantially until 2023, it experienced a decline thereafter. The stable cost of capital amidst rising invested capital highlights consistent financing conditions even as the company expands. However, the decline in economic profit from 2022 onward indicates challenges in maintaining value creation relative to the increased capital base, potentially signaling efficiency or profitability pressures on additional investments. These trends suggest a need for focus on capital allocation efficiency 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 exhibited fluctuations over the analyzed periods. Starting at 8,061 million US dollars in early 2020, there was a slight decline to 7,405 million in early 2021. Subsequently, this figure increased significantly, peaking at 11,585 million by early 2022. After this peak, a downward trend is observed, with economic profit decreasing to 6,886 million by early 2025, indicating a reduction to almost half of the peak value within three years.

Invested Capital

Invested capital demonstrated consistent growth across the periods under review. Beginning at 36,678 million US dollars in early 2020, it rose substantially to 49,973 million by early 2021. Despite a slight dip to 48,299 million in early 2022, invested capital continued its upward trajectory, reaching 72,841 million by early 2025. This reflects a near doubling of invested capital over five years, suggesting expanded investment activities or asset base growth.

Economic Spread Ratio

The economic spread ratio experienced notable variability, starting at 21.98% in early 2020. It declined to 14.82% in early 2021, then sharply increased to 23.99% by early 2022, marking the highest value in the period studied. Thereafter, the ratio displayed a consistent downward trend, reaching 9.45% by early 2025. This decline in economic spread ratio towards the end of the period indicates a reduction in the return on capital relative to the cost of capital.

Overall Insights

The data reveals a situation where invested capital expanded steadily, but economic profit peaked and then declined significantly after early 2022. The economic spread ratio's pattern mirrors this, showing initial volatility but a clear decline in recent years. This suggests that while the company increased its invested capital base, the efficiency in generating economic value from this capital diminished over time. The declining economic spread ratio and economic profit in the context of rising invested capital may imply challenges in maintaining profitability relative to the capital employed.

Economic Profit

The economic profit demonstrates notable fluctuations over the years. Beginning at 8,061 million US dollars in 2020, it slightly declined to 7,405 million in 2021. Subsequently, there is a marked increase reaching a peak of 11,585 million in 2022. This is followed by a moderate decrease to 10,751 million in 2023. The trend then depicts a sharper decline over the next two years, falling to 8,672 million in 2024 and further down to 6,886 million by 2025.

Adjusted Net Sales

Adjusted net sales show a generally upward trajectory. Starting at 110,559 million US dollars in 2020, the sales grew steadily each year, reaching 132,817 million in 2021, 151,930 million in 2022, and peaking slightly higher at 156,871 million in 2023. In 2024, there is a minor decline to 152,367 million, followed by a resurgence to the highest recorded figure of 159,362 million in 2025.

Economic Profit Margin

The economic profit margin exhibits a declining trend. Initially, the margin stands at 7.29% in 2020, then decreases notably to 5.58% in 2021. It recovers to 7.63% in 2022, the highest margin during this period. However, from 2022 onward, there is a consistent downward movement, falling to 6.85% in 2023, 5.69% in 2024, and finally to the lowest point of 4.32% in 2025.

Summary of Trends

The data reflects a pattern where adjusted net sales generally grow over the six-year period, albeit with slight variability. Economic profit shows greater volatility with a peak in 2022 followed by a steady decline. The economic profit margin follows a similar pattern, peaking in 2022 but declining sharply thereafter. This suggests that despite growth in sales, profitability relative to sales is decreasing, indicating potential pressure on margins or increased costs over time.