Home Depot Inc. (NYSE:HD)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed a generally increasing trend from 2020 to 2022, rising from 12,860 million US dollars to a peak of 18,170 million US dollars in 2023. However, it experienced a decline in the subsequent years, falling to 16,384 million in 2024 before slightly improving to 16,730 million in 2025. This indicates that while profitability improved initially, recent years have witnessed some contraction.

Cost of Capital

The cost of capital remained relatively stable across the years analyzed, fluctuating slightly between 13.09% and 13.80%. The highest value was recorded in 2024 at 13.80%, and the lowest in 2020 at 13.09%. These minor variations suggest consistent capital costs without significant volatility during the period.

Invested Capital

Invested capital demonstrated a notable upward trajectory throughout the period. Starting at 36,678 million US dollars in 2020, it increased substantially to 72,841 million in 2025. There was a notable jump between 2024 and 2025, which could indicate major investments or asset acquisitions. Overall, the data reflects a significant expansion in the capital base over the analyzed years.

Economic Profit

Economic profit peaked in 2022 at 11,583 million dollars, coinciding with the peak in NOPAT and a relatively stable capital cost. Since then, economic profit has declined steadily to 6,882 million in 2025, despite the growth in invested capital. This declining economic profit despite rising capital suggests diminishing returns on investment and potential challenges in value creation.

Overall Analysis

The data reveals a pattern where net operating profits initially increased before facing recent decreases, while invested capital steadily expanded, particularly marked by a significant rise in the last period. The cost of capital remained mostly steady, indicating stable funding conditions. However, economic profit's decline despite increased invested capital signals diminishing efficiency or profitability in utilizing the expanded capital base. This trend may warrant further investigation into operational efficiencies or capital allocation strategies 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 shows significant fluctuations over the observed periods. Starting at 8,059 million USD in early 2020, there is a decline in 2021 to 7,402 million USD, followed by a substantial increase peaking at 11,583 million USD in 2022. However, after 2022, economic profit experiences a consistent decline through 2023, 2024, and 2025, reaching a low of 6,882 million USD. This indicates volatility in profitability, with a notable downward trend in the latter years.

Invested Capital

Invested capital demonstrates a general upward trend throughout the periods. Beginning at 36,678 million USD in 2020, it increases sharply to 49,973 million USD in 2021. There is a slight dip in 2022 to 48,299 million USD but resumes growth in subsequent years, reaching a high of 72,841 million USD by 2025. This consistent growth suggests ongoing or increased investment in assets over the years.

Economic Spread Ratio

The economic spread ratio, expressed as a percentage, reflects the relationship between economic profit and invested capital. It shows a declining trend overall, beginning at a robust 21.97% in 2020, dropping markedly to 14.81% in 2021. It recovers somewhat to 23.98% in 2022 but then declines steadily to 19.5% in 2023, 15.51% in 2024, and reaches a low of 9.45% in 2025. This downward progression indicates a decreasing efficiency in generating economic profits from the invested capital over time.

Summary Insights

An analysis of the relationships among these indicators suggests that while the company has been increasing its invested capital significantly over the years, the returns in terms of economic profit have not maintained a commensurate pace. The decline in the economic spread ratio, particularly towards 2025, highlights diminishing returns on investment. This could imply either increased costs, reduced margins, or suboptimal capital allocation in recent periods. The peak in economic profit in 2022 contrasts with the considerable drop in subsequent years, warranting investigation into factors affecting profitability post-2022.

The financial data over the analyzed periods reveal distinct trends in economic profit, adjusted net sales, and economic profit margin. These trends indicate changes in profitability and sales performance over time.

Economic Profit

The economic profit demonstrates significant fluctuation throughout the periods. It started at $8,059 million in 2020, decreased to $7,402 million in 2021, then rose sharply to a peak of $11,583 million in 2022. After this peak, economic profit declined in the subsequent years to $10,748 million in 2023, $8,669 million in 2024, and further down to $6,882 million in 2025. This pattern suggests a peak in profitability around 2022, followed by a gradual reduction in economic profit over the next three years.

Adjusted Net Sales

Adjusted net sales show a general upward trend with some variability. The sales increased steadily from $110,559 million in 2020 to $156,871 million in 2023, marking substantial growth over these four years. Despite a slight dip to $152,367 million in 2024, sales rebounded again to reach $159,362 million in 2025. This overall growth implies effective revenue generation and solid market demand, even though there was a minor sales contraction in 2024.

Economic Profit Margin

The economic profit margin trend mirrors the fluctuations observed in economic profit but displays a more consistent decline towards the later periods. It started at 7.29% in 2020, decreased to 5.57% in 2021, then rose to 7.62% in 2022, indicating higher profitability relative to sales during that year. However, after 2022, the margin steadily declined to 6.85% in 2023, 5.69% in 2024, and finally 4.32% in 2025. This decreasing trend in margin suggests rising costs or decreasing efficiency impacting profitability relative to sales.

In summary, the data indicates that while adjusted net sales have generally increased over the period, economic profit peaked in 2022 and has since been declining. Correspondingly, the economic profit margin has shown a downward trajectory after 2022, suggesting potential challenges in cost management or profitability sustainability despite growing sales.