Home Depot Inc. (NYSE:HD)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes (NOPAT) exhibited a general upward trend from 2020 through 2023, rising from approximately $12,860 million in 2020 to a peak of around $18,170 million in 2023. However, a decline was observed in 2024 to approximately $16,384 million, followed by a slight increase to $16,730 million in 2025.

Invested Capital

Invested capital displayed consistent growth over the analyzed period. It increased notably from about $36,678 million in 2020 to $72,841 million in 2025. The most significant increments occurred between 2021 and 2025, indicating substantial capital investment or asset expansion during these years.

Return on Invested Capital (ROIC)

The return on invested capital showed a fluctuating but generally declining pattern over time. Starting at a high of 35.06% in 2020, ROIC dropped to 28.36% in 2021, then recovered to 37.57% in 2022. Subsequently, it gradually decreased to 32.97% in 2023, then further to 29.32% in 2024, reaching the lowest point of 22.97% in 2025. This indicates diminishing efficiency in generating returns from the invested capital despite increasing invested capital levels.

Overall Analysis

The data suggest that while operational profits increased in the early part of the period, the growth rate slowed and slightly reversed toward the end. Concurrently, invested capital almost doubled, reflecting significant resource allocation or asset accumulation. However, the decreasing ROIC trend implies that the incremental capital investments were less effective at generating proportional profit gains in the later years. This trend highlights a potential area of concern regarding capital utilization efficiency and operational profitability sustainability.

Operating Profit Margin (OPM)

The operating profit margin demonstrates a generally fluctuating but downward trend over the analyzed periods. It started at 14.86% in early 2020, peaked at 15.81% in early 2022, and subsequently declined to 13.76% by early 2025. This suggests a reduction in operational efficiency or increasing costs relative to revenue in the most recent years.

Turnover of Capital (TO)

The turnover of capital ratio exhibits variability with an overall declining tendency from 3.01 in 2020 to 2.19 in 2025. After an increase to 3.15 in 2022, it fell progressively in the following years. The downward trend may indicate less efficient use of capital in generating revenue over the longer term.

Effective Cash Tax Rate (1 – CTR)

The effective cash tax rate, represented as one minus the CTR, shows minor fluctuations but remains relatively stable around the mid-70% range throughout the period. This stability reflects consistent tax expense management with limited volatility.

Return on Invested Capital (ROIC)

Return on invested capital experienced notable volatility, with an initial decrease from 35.06% to 28.36% between 2020 and 2021, followed by a peak of 37.57% in 2022. Subsequently, ROIC declined sharply to 22.97% by 2025. The pattern suggests variable capital efficiency and profitability, with a marked drop in recent years impacting overall returns.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes shows an overall increasing trend from 16,433 million USD in 2020 to a peak of 24,024 million USD in 2022. However, from 2022 onwards, there is a gradual decline observed, with values decreasing to 23,791 million USD in 2023 and further down to approximately 21,931 million USD by 2025. This indicates a peak in profitability in 2022 followed by a reduction in operating income before taxes in subsequent years.

Adjusted Net Sales

Adjusted net sales depict a consistent upward trajectory over the period, rising from 110,559 million USD in 2020 to 159,362 million USD by 2025. Growth appears steady, with notable increments each year, including a significant increase from 132,817 million USD in 2021 to 151,930 million USD in 2022, and continuing growth through to 2025, showing sustained revenue expansion over time.

Operating Profit Margin (OPM)

The operating profit margin exhibits slight fluctuations but a generally declining trend in the later years. Starting at 14.86% in 2020, it shows some variability, peaking at 15.81% in 2022, followed by a gradual decrease to 15.17% in 2023, 14.35% in 2024, and further down to 13.76% in 2025. This suggests that although sales increased, the efficiency or profitability relative to sales is decreasing, reflecting possible rising costs or margin pressures during the latter part of the period assessed.

Adjusted Net Sales

Adjusted net sales demonstrated a generally upward trajectory over the observed periods, increasing from 110,559 million US dollars in 2020 to 159,362 million US dollars in 2025. The growth was consistent except for a slight decline in 2024, where sales decreased from 156,871 million US dollars in 2023 to 152,367 million US dollars.

Invested Capital

Invested capital exhibited a rising trend, starting at 36,678 million US dollars in 2020 and rising significantly to 72,841 million US dollars in 2025. Notably, invested capital saw a sharp increase in the final reporting period, more than doubling the 2020 figure and increasing substantially compared to prior years.

Turnover of Capital (TO)

The turnover of capital ratio showed a fluctuating but overall declining trend from 2020 to 2025. Initially, it was 3.01 in 2020, experienced some periods of increase and decrease, peaking at 3.15 in 2022, followed by a steady decrease to 2.19 by 2025. This suggests that despite increasing invested capital, the efficiency in generating sales from that capital has decreased over the latter periods.

Overall Analysis

The data reveals that while adjusted net sales have generally increased, the invested capital has grown at a sharper pace, leading to a declining turnover of capital ratio. This indicates that the company has been investing heavily, but the return on those investments in terms of sales generation has diminished in recent years. The drop in net sales in 2024 is a point of interest amid the otherwise upward trend, and the continued increase in invested capital alongside a falling turnover ratio warrants attention regarding capital utilization efficiency.

The financial data reveals several notable trends over the recent six-year period. Both the net operating profit before taxes (NOPBT) and cash operating taxes exhibit fluctuations, with variations in the effective cash tax rate (CTR) reflecting underlying tax burden changes.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes shows an overall upward trend from 16,433 million USD in early 2020 to a peak of 24,024 million USD by early 2022. However, this peak was followed by a decline in the subsequent periods, reaching 21,931 million USD by early 2025. This suggests that profitability expanded significantly until 2022 but faced pressure thereafter, possibly due to changing market conditions or operational challenges.

Cash Operating Taxes

Cash operating taxes increased from 3,573 million USD in early 2020 to a high of 5,876 million USD in early 2022. Afterward, these tax payments exhibited a declining pattern, decreasing to 5,201 million USD by early 2025. The movement in cash taxes correlates somewhat with changes in the net profit before taxes, though the decline in taxes after 2022 is sharper relative to the decline in NOPBT.

Effective Cash Tax Rate (CTR)

The effective cash tax rate fluctuated moderately over the period, starting at 21.74% in early 2020 and climbing to a high of 26.23% in early 2021. Thereafter, the rate stabilized around the mid-20% range, settling at 23.72% by early 2025. The variation suggests changes in the company’s tax planning strategies or shifts in tax regulations affecting the overall tax burden.

In summary, profitability experienced strong growth through early 2022, followed by a decline, while cash taxes followed a similar pattern but with a more pronounced decrease post-2022. The effective tax rate showed moderate volatility but remained relatively stable in the latter years. These trends collectively indicate a dynamic operating environment with fluctuations in both earnings and tax impacts.