Home Depot Inc. (NYSE:HD)

The analysis of the financial data over the specified periods reveals several notable trends and insights regarding profitability, capital efficiency, and economic value creation.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows an overall upward trajectory from 12,860 million USD in early 2020 to a peak of 18,170 million USD in early 2023. However, it slightly declines to 16,384 million USD in early 2024 before marginally recovering to 16,730 million USD by early 2025. This suggests growth in operating profitability over the medium term, though with some recent volatility or contraction.

Cost of Capital

The cost of capital remains relatively stable throughout the timeline, fluctuating narrowly between 12.94% and 13.65%. This consistency indicates that the company’s capital costs have not experienced significant variation, providing a stable benchmark for evaluating economic profit.

Invested Capital

Invested capital demonstrates a strong increasing trend, growing from 36,678 million USD in early 2020 to 72,841 million USD by early 2025. This represents nearly a doubling of capital investment over five years, indicating substantial asset growth or increased capital deployment. The most pronounced rise occurs between early 2024 and early 2025.

Economic Profit

Economic profit, which measures value creation after accounting for the cost of capital, increased from 8,112 million USD in early 2020 to a high of 11,656 million USD in early 2022, before declining to 6,991 million USD in early 2025. Despite the upward trend initially, the decline over the last three years suggests a reduction in value creation efficiency relative to invested capital and cost of capital.

In summary, while profitability measured by NOPAT has generally increased, the rapid growth in invested capital has outpaced economic profit growth, leading to a decline in value creation efficiency as indicated by the fall in economic profit after 2022. The stable cost of capital implies that this trend is not due to increased financing costs but likely due to diminishing returns on the newly invested capital. The data suggests a need to scrutinize the capital allocation to ensure sustainable economic value creation moving forward.

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 displays notable fluctuations over the periods analyzed. Starting at 8,112 million US dollars in 2020, it declined to 7,477 million in 2021. Subsequently, there was a significant increase to 11,656 million in 2022, followed by a slight decrease to 10,830 million in 2023. The trend reversed sharply in the last two periods, with economic profit reducing to 8,756 million in 2024 and further declining to 6,991 million in 2025. Overall, the pattern indicates volatility with a peak in 2022 and a downward trajectory in the final years.

Invested Capital

Invested capital shows an overall rising trend across the periods. Beginning at 36,678 million US dollars in 2020, it rose sharply to 49,973 million in 2021. There was a slight decline in 2022 to 48,299 million, but the upward trajectory resumed thereafter, reaching 55,111 million in 2023, continuing to 55,884 million in 2024, and then increasing substantially to 72,841 million in 2025. This steady growth, despite a minor setback in 2022, reflects ongoing investment and expansion in capital assets.

Economic Spread Ratio

The economic spread ratio exhibits a general pattern of decline throughout the analyzed timeframe. The ratio started at a high of 22.12% in 2020, dropped to 14.96% in 2021, then rebounded sharply to 24.13% in 2022. After this peak, the ratio decreased to 19.65% in 2023, then further to 15.67% in 2024 and sharply down to 9.6% in 2025. The significant volatility and overall downward trend in this ratio suggest diminishing returns on invested capital despite the growth in capital itself.

Adjusted Net Sales

The adjusted net sales exhibit a generally increasing trend over the examined periods, rising from approximately 110.6 billion USD in early 2020 to around 159.4 billion USD by early 2025. Growth was consistent year-over-year, although the pace of increase appears to moderate somewhat in the latest period, as evidenced by a smaller increment between January 2024 and February 2025.

Economic Profit

The economic profit fluctuated notably during the time frame. Initial values show a standing of about 8.1 billion USD in early 2020, dipping to approximately 7.5 billion USD in early 2021. A significant rebound occurs in the two subsequent periods, reaching a peak near 11.7 billion USD in early 2022 before declining again to roughly 7.0 billion USD by early 2025. This pattern indicates variability in profitability that does not strictly follow the sales trend.

Economic Profit Margin

The economic profit margin, expressed as a percentage, displays a declining trend across the time series. Starting from 7.34% in early 2020, it decreases to 4.39% by early 2025. Despite some intermediate fluctuations, the overall reduction indicates that although sales increased, the efficiency or return on sales in terms of economic profit has diminished over the period examined.

Combined Insight

While adjusted net sales have generally increased, indicating business expansion or enhanced revenue generation, the economic profit and its margin do not follow the same upward trajectory consistently. The economic profit shows volatility with a mid-period peak but ends lower than initial values. The declining economic profit margin suggests potential challenges in cost management, pricing pressures, or increased capital charges, resulting in reduced profitability relative to sales. This divergence highlights a weakening in operational efficiency or higher economic costs impacting net value creation despite strong sales performance.