Home Depot Inc. (NYSE:HD)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited a consistent increase from 12,860 million US dollars in 2020 to a peak of 18,170 million US dollars in 2023. There was a decline in 2024 to 16,384 million, followed by a slight recovery to 16,730 million in 2025. This pattern suggests robust growth initially, with a reduction in profitability in the later years relative to the peak.

Cost of Capital

The cost of capital displayed relative stability across the years, fluctuating slightly between 12.93% and 13.63%. It increased modestly from 12.93% in 2020 to 13.42% in 2022, with minor variations afterward, ending at 13.35% in 2025. This indicates a fairly steady capital cost environment during the period under review.

Invested Capital

Invested capital showed a significant upward trend, rising from 36,678 million US dollars in 2020 to 72,841 million in 2025. Noteworthy is the sharp increase between 2024 and 2025. This trend reflects considerable capital deployment or accumulation, suggesting expansion or investment activities intensifying over time.

Economic Profit

Economic profit increased from 8,118 million US dollars in 2020 to a high of 11,664 million in 2022, before gradually declining in subsequent years down to 7,003 million in 2025. The initial growth followed by a decrease indicates that although the company generated value exceeding its cost of capital early in the period, this excess value creation diminished notably toward the end of the period despite rising invested capital.

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 fluctuations over the period. It began at 8,118 million US dollars in early 2020, showing a slight decline in 2021 to 7,486 million. In 2022, there was a notable increase to 11,664 million, followed by a decrease in subsequent years, reaching 7,003 million by early 2025. This pattern suggests variability in profitability, with a peak in 2022, followed by a downward trend in the following years.

Invested Capital

Invested capital shows an overall upward trend across the period. Starting at 36,678 million US dollars in 2020, it increased sharply to 49,973 million in 2021. A slight drop occurred in 2022 to 48,299 million, but then it resumed rising steadily to reach 72,841 million by early 2025. The increasing invested capital indicates ongoing expansion or investment activities within the company.

Economic Spread Ratio

The economic spread ratio exhibits considerable volatility and a general downward tendency over the analyzed years. It started at 22.13% in 2020, decreased to 14.98% by 2021, then peaked at 24.15% in 2022 before declining consistently over the next three years to 9.61% in 2025. This indicates diminishing efficiency in generating returns above the cost of capital despite changes in capital investments and profit levels.

Summary Insights

The financial data indicates that while the company has been increasing its invested capital substantially over the years, economic profit has not maintained a consistent growth trajectory and has declined notably after 2022. The decreasing economic spread ratio further underscores challenges in maintaining profitability relative to the cost of capital. The peak in economic profit and spread ratio in 2022 suggests that year was exceptionally strong, but subsequent years reveal pressure on profitability and capital efficiency. This may point to increased costs, competitive pressures, or other operational challenges affecting returns despite higher capital deployment.

Economic Profit

The economic profit demonstrates a fluctuating trend over the analyzed periods. It started at 8118 million US dollars in February 2020, decreased slightly to 7486 million in January 2021, then increased significantly to reach a peak of 11664 million in January 2022. After this peak, there was a gradual decline, falling to 10840 million in January 2023, then to 8765 million in January 2024, and further decreasing to 7003 million in February 2025. This indicates a downward trend in economic profit in the most recent years, despite a notable peak in 2022.

Adjusted Net Sales

Adjusted net sales have shown consistent growth, starting from 110559 million US dollars in February 2020 and steadily increasing each year to 159362 million by February 2025. The growth trajectory is relatively stable, with a substantial increase between 2020 and 2022, and continued growth thereafter, indicating robust revenue expansion over the period analyzed.

Economic Profit Margin

The economic profit margin exhibits variability and an overall declining trend. It started at 7.34% in February 2020, dropped to 5.64% in January 2021, then rose to the peak of 7.68% in January 2022. Following this, a consistent decline occurred, falling to 6.91% in January 2023, 5.75% in January 2024, and reaching the lowest point of 4.39% in February 2025. This trend suggests decreasing profitability relative to net sales over the most recent years despite prior volatility.

Summary of Trends

While adjusted net sales have shown steady and significant growth, both economic profit and economic profit margin have experienced more cyclical and declining patterns post-2022. This divergence suggests that despite higher sales volumes, the company is facing challenges in translating revenue growth into proportionate economic profit, potentially due to rising costs, competitive pressures, or operational inefficiencies. The declining profit margin further supports the observation of decreasing profitability efficiency relative to sales.