Home Depot Inc. (NYSE:HD)

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited an overall upward trend from 12,860 million USD in early 2020 to a peak of 18,170 million USD in early 2023. However, it declined thereafter, reaching 16,730 million USD by early 2025. This indicates strong profit growth until 2023, followed by a moderate decrease in profitability.

Cost of Capital

The cost of capital fluctuated slightly over the period, ranging from approximately 12.91% to 13.61%. It showed a slight increase from 12.91% in 2020 to a high of 13.61% in 2024, before reducing marginally to 13.33% in 2025. This suggests relatively stable but slightly rising capital costs over the five-year span.

Invested Capital

Invested capital increased significantly from 36,678 million USD in 2020 to 72,841 million USD in 2025, nearly doubling over five years. There was a notable jump between 2024 and 2025, indicating a substantial expansion in capital investment in the latest year.

Economic Profit

Economic profit demonstrated variability, rising from 8,127 million USD in 2020 to a peak of 11,676 million USD in 2022, then gradually declining to 7,021 million USD in 2025. Despite the increase in invested capital, economic profit diminished in the final years, signaling potential challenges in generating returns above the cost of capital.

Summary of Trends and Insights

Profitability as measured by NOPAT increased strongly until early 2023 but decreased slightly afterward, which may reflect operational or market pressures. The cost of capital remained relatively stable but showed a slight upward trend, potentially increasing the hurdle for return generation.

The substantial growth in invested capital, especially in the latest year, did not correspond with a proportional increase in economic profit, which decreased over the last three years. This divergence may indicate diminishing returns on new investments or inefficiencies. The decline in economic profit despite higher invested capital suggests that the company may face challenges in maintaining value creation relative to the cost of capital going 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 experienced fluctuations over the reported periods. Initially, it decreased from 8,127 million US dollars in early 2020 to 7,498 million by early 2021. This was followed by a notable increase, peaking at 11,676 million in early 2022. Subsequently, a downward trend ensued, with economic profit declining to 10,853 million in early 2023 and further to 7,021 million by early 2025, indicating a reduction in value creation in the most recent years.

Invested Capital

Invested capital demonstrated an overall increasing trend. It rose significantly from 36,678 million US dollars in early 2020 to 49,973 million in early 2021, then slightly decreased to 48,299 million in early 2022. Afterward, it grew steadily, reaching 55,884 million by early 2024 and culminating at 72,841 million by early 2025. This growth suggests a substantial increase in the capital employed in the business over time.

Economic Spread Ratio

The economic spread ratio exhibited variability, reflecting changes in profitability relative to invested capital. It started at a high level of 22.16% in early 2020, dropping to 15% in early 2021, then rebounding to 24.17% in early 2022. Following this peak, the ratio consistently declined over the subsequent years, reaching 9.64% by early 2025. The declining economic spread ratio in recent years indicates diminishing returns on the invested capital.

Summary of Trends

In summary, despite the growth in invested capital, economic profit peaked in early 2022 and has since declined notably. The economic spread ratio, which measures profitability relative to capital, also shows a downward trend after an initial peak, suggesting decreased efficiency in generating returns on the invested resources. The combined patterns indicate potential challenges in sustaining high levels of economic profit amid expanding capital investment.

Economic Profit

The economic profit displays a volatile pattern over the analyzed period. It started at 8,127 million USD and declined to 7,498 million USD the following year. Subsequently, there was a significant increase to 11,676 million USD, followed by a slight decrease to 10,853 million USD. Thereafter, a consistent downward trend is observed, with economic profit decreasing to 8,779 million USD and further to 7,021 million USD in the latest period.

Adjusted Net Sales

Adjusted net sales exhibit an overall upward trajectory throughout the periods. Starting at 110,559 million USD, sales increased steadily each year, reaching 132,817 million USD, then 151,930 million USD, followed by 156,871 million USD. A minor decline to 152,367 million USD occurred thereafter; however, it rebounded to 159,362 million USD in the latest period, indicating resilience in sales performance.

Economic Profit Margin

The economic profit margin shows a declining trend overall. It began at 7.35% and dropped to 5.65% in the following year. Then it recovered to 7.69%, followed by a gradual decrease to 6.92%, 5.76%, and ultimately 4.41%, reflecting diminishing profitability relative to sales over time despite fluctuations in absolute economic profit.

Summary Insights

Despite increasing adjusted net sales with minor interruptions, the economic profit and economic profit margin reveal a deteriorating profitability trend, particularly in recent years. The drop in profit margin coupled with decreasing economic profit indicates that while revenue grows, the company’s ability to convert sales growth into economic profit is weakening. This could imply rising costs, inefficiencies, or increased competition impacting overall financial performance.