Home Depot Inc. (NYSE:HD)

An analysis of the valuation ratios reveals a period of significant volatility followed by a general trend of stabilization in earnings-based metrics, contrasted by a sharp, sustained contraction in book value relative to share price.

Price to Earnings (P/E) Ratio

The P/E ratio exhibited a cyclical pattern, starting at 22.81 in May 2021 and declining to a trough of 17.09 by January 2023. A recovery phase ensued, with the ratio climbing to a peak of 27.73 in August 2025. Toward the end of the observed period, the ratio stabilized, fluctuating between 22.62 and 23.69 from February to August 2026.

Price to Operating Profit (P/OP) Ratio

The P/OP ratio closely mirrored the trajectory of the P/E ratio. After an initial peak of 19.12 in October 2021, the ratio declined to its lowest point of 12.16 in January 2023. It subsequently recovered, reaching 19.08 in October 2022 and maintaining a range between 15.28 and 16.04 during the first half of 2026.

Price to Sales (P/S) Ratio

The P/S ratio followed a similar trend of contraction and recovery. It peaked at 2.89 in October 2021 before dropping to 1.86 in January 2023. A secondary peak occurred in October 2024 at 2.61, after which the ratio entered a moderate decline, ending at 1.99 in August 2026.

Price to Book Value (P/BV) Ratio

The P/BV ratio demonstrated extreme variance and a distinct divergence from the other valuation metrics. While the ratio reached an exceptional high of 1,325.66 in July 2022, it underwent a consistent and aggressive downward trend starting in April 2024. From a value of 82.54 in April 2024, the ratio declined steadily each quarter, reaching a period low of 20.29 by August 2026.

The correlation between the P/E, P/OP, and P/S ratios suggests that market valuation was consistently driven by earnings and revenue performance. Conversely, the dramatic collapse of the P/BV ratio indicates a substantial increase in book value or a fundamental restructuring of the equity base that decoupled book value from the trends seen in operational profitability.

The valuation metrics exhibit a period of cyclical volatility characterized by fluctuating price-to-earnings (P/E) multiples and shifting earnings per share (EPS) trajectories between May 2021 and August 2026.

Earnings per Share (EPS) Performance

EPS demonstrated a consistent growth phase from May 2021 (13.89) through a peak in January 2023 (16.85). Following this peak, a gradual downward trend is observed, with earnings declining and eventually stabilizing within the 14.05 to 14.89 range throughout 2024 and 2025, ending at 14.26 in August 2026.

Share Price Movements

The share price experienced significant volatility, with three distinct peaks exceeding 400 USD in October 2021, October 2024, and August 2025. These peaks were contrasted by notable troughs, where the price dipped below 300 USD during May 2022 and January 2023.

P/E Ratio Analysis

The P/E ratio underwent a notable compression cycle, descending from 22.81 in May 2021 to a period low of 17.09 in January 2023. A subsequent expansion phase occurred, with the ratio climbing to a peak of 27.73 by August 2025. The ratio concluded the analyzed period at 23.69, returning to a valuation level closely aligned with the initial 2021 figures.

The correlation between these metrics indicates that the P/E ratio expansions in 2024 and 2025 were primarily driven by share price appreciation rather than earnings growth, as the ratio increased while EPS remained relatively flat or declined.

The valuation metrics indicate a period of significant volatility in share price contrasted with a more stable trajectory in operating profit per share. While operating profit experienced an initial growth phase, the Price to Operating Profit (P/OP) ratio fluctuated considerably, reflecting shifting market sentiment and valuation premiums over the analyzed period.

Share Price Trends

The share price exhibited substantial variance, characterized by multiple peaks and troughs. An early peak of 408.37 was reached in October 2021, followed by a decline to a low of 287.92 by May 2022. A secondary recovery phase occurred, leading to subsequent peaks of 406.80 in October 2024 and 407.54 in August 2025. The period concludes with a moderate decline to 337.88 by August 2026.

Operating Profit per Share Performance

Operating profit per share demonstrated a steady upward trend during the first half of the period, rising from 19.55 in May 2021 to a peak of 23.68 in January 2023. Following this peak, a gradual contraction occurred, with values stabilizing between 20.80 and 21.70 from February 2025 through August 2026. This suggests a transition from a high-growth phase to a period of operational stability.

Price to Operating Profit (P/OP) Ratio Analysis

The P/OP ratio shows a cyclical pattern of expansion and contraction. A valuation compression is evident between May 2022 and April 2023, where the ratio dropped from 12.76 to a low of 12.16, despite increasing operating profits. A subsequent valuation expansion occurred, peaking at 19.08 in October 2024, driven largely by the increase in share price. Towards the end of the series, the ratio stabilized, ending at 16.04 in August 2026, returning to levels similar to those observed at the start of the period in 2021.

The valuation of the common stock exhibits cyclical volatility in the Price-to-Sales (P/S) ratio, reflecting fluctuations in market sentiment despite a consistent long-term increase in sales per share.

Sales per Share Performance

A steady upward trajectory is observed in sales per share, which rose from 132.94 in May 2021 to 169.57 by August 2026. While a period of relative stagnation occurred between January 2023 and July 2024, where values hovered between 153.11 and 155.63, a renewed growth phase began in early 2025 and continued through the end of the period.

Share Price Volatility

The share price demonstrates significant variance, characterized by three distinct peaks exceeding 400.00 in October 2021, October 2024, and August 2025. These peaks are interspersed with notable corrections, specifically falling below 300.00 in May 2022 and January 2023.

P/S Ratio Analysis

The P/S ratio fluctuated between a maximum of 2.89 in October 2021 and a minimum of 1.86 in January 2023. Because sales per share grew more linearly than the share price, the movements in the P/S ratio are primarily driven by share price volatility rather than fundamental changes in sales volume.

Valuation Trends (2024-2026)

From January 2024 through August 2026, the P/S ratio operated within a range of 1.90 to 2.61. A peak valuation was reached in October 2024 (2.61), followed by a gradual compression toward 1.99 by August 2026. This compression occurred even as sales per share reached their highest levels in the analyzed period, suggesting a moderate cooling of the valuation multiple relative to revenue growth.

The valuation profile over the analyzed period is characterized by extreme volatility in the Price to Book Value (P/BV) ratio, driven primarily by significant fluctuations in the Book Value Per Share (BVPS) rather than share price volatility.

Book Value Per Share Trends

The BVPS exhibited a period of instability between May 2021 and January 2024, with values frequently hovering near zero and dipping into negative territory during the first half of 2022. However, a structural shift occurred starting in April 2024, where BVPS began a consistent and accelerated ascent, rising from 1.84 to 16.66 by August 2026.

P/BV Ratio Volatility and Peaks

The P/BV ratio reached extraordinary levels during periods of minimal book value. A peak of 1,325.66 was recorded in July 2022, coinciding with a BVPS of only 0.23. This inverse relationship demonstrates that the market valuation remained relatively stable while the underlying book value experienced severe contraction, leading to mathematically inflated ratios.

Valuation Convergence

Beginning in early 2024, a sustained downward trend in the P/BV ratio is observed. As the BVPS grew from 1.05 in October 2023 to 16.66 in August 2026, the P/BV ratio compressed from 359.76 to 20.29. This trajectory indicates a significant strengthening of the equity base relative to the market price, resulting in a more normalized valuation multiple.

Share Price Correlation

The share price remained within a range of approximately 287.92 to 408.37 throughout the period. Because the share price did not exhibit the same magnitude of change as the BVPS, the fluctuations in the P/BV ratio are attributed almost entirely to changes in the company's book value rather than shifts in market sentiment or stock price appreciation.