Home Depot Inc. (NYSE:HD)

The valuation ratios exhibit a cyclical pattern characterized by a period of multiple compression between 2022 and early 2023, followed by an expansion phase that peaked in 2025 before stabilizing toward the end of the analyzed period. There is a strong correlation between price-to-earnings and price-to-operating profit metrics, suggesting that market valuation remained closely tied to profitability benchmarks.

Price to Earnings (P/E) and Price to Operating Profit (P/OP)

The P/E ratio experienced a downward trend from 22.81 in May 2021 to a low of 17.09 in January 2023. Subsequently, a recovery phase occurred, with the ratio reaching a peak of 27.73 in August 2025. The P/OP ratio mirrors this trajectory, declining from 16.20 to a trough of 12.16 in January 2023, before climbing to a high of 19.08 in October 2024. By May 2026, the P/E and P/OP ratios normalized to 22.62 and 15.28, respectively, returning to levels similar to the start of the period.

Price to Sales (P/S)

The P/S ratio remained relatively stable but followed the broader valuation trend. It reached a minimum of 1.86 in January 2023 and a maximum of 2.61 in October 2024. A gradual decline is observed in the final year of the data, ending at 1.90 in May 2026, which indicates a contraction in the premium the market was willing to pay per unit of revenue.

Price to Book Value (P/BV)

The P/BV ratio displays extreme volatility and a significant structural shift. Early peaks were observed in July 2022 at 1,325.66 and April 2023 at 819.13. However, beginning in April 2024, a consistent and sharp downward trend is evident. The ratio fell from 82.54 in April 2024 to 22.84 by May 2026. This precipitous decline suggests a substantial increase in the book value of equity or a fundamental repricing of the company's assets relative to its market capitalization.

The valuation metrics between May 2021 and May 2026 reveal a period of significant volatility in equity pricing coupled with a cyclical trajectory in earnings per share, which directly influenced the Price-to-Earnings (P/E) ratio.

Share Price Trends

The share price exhibited a fluctuating pattern with two distinct peaks. An initial high of 408.37 USD was reached in October 2021, followed by a correction that saw prices drop to 287.92 USD by May 2022. A second recovery phase led to a peak of 407.54 USD in August 2025, before the price declined to 317.85 USD by May 2026.

Earnings per Share (EPS) Performance

EPS showed a consistent growth phase from May 2021, rising from 13.89 USD to a peak of 16.85 USD in January 2023. Following this peak, a sustained downward trend is observed, with earnings gradually contracting to 14.05 USD by the end of the analyzed period in May 2026.

P/E Ratio Interpretation

The P/E ratio fluctuated between a low of 17.09 in January 2023 and a high of 27.73 in August 2025. A notable inverse relationship is observed in January 2023, where the P/E ratio hit its minimum point while EPS reached its maximum. Conversely, the P/E ratio peaked in August 2025, driven by a combination of high share prices and declining earnings. The ratio concluded the period at 22.62, returning to a level nearly identical to the initial May 2021 valuation of 22.81.

The valuation of the common stock, as measured by the Price to Operating Profit (P/OP) ratio, demonstrates significant volatility and a cyclical pattern over the period from May 2021 to May 2026.

Share Price Volatility

The share price experienced several distinct peaks, notably reaching approximately 408 US$ in October 2021, October 2024, and August 2025. Conversely, troughs were observed in May 2022 and January 2023, where prices dipped below 290 US$. This price instability serves as the primary driver for the fluctuations in the P/OP ratio.

Operating Profit Per Share Trends

Operating profit per share exhibited a steady increase from 19.55 US$ in May 2021 to a peak of 23.68 US$ in January 2023. Following this peak, a slight decline occurred, with the value stabilizing between 20.80 US$ and 21.70 US$ from January 2024 through May 2026. The relative stability of the operating profit in the latter half of the period suggests that valuation changes are driven more by market sentiment than by fundamental operational shifts.

P/OP Ratio Analysis

The P/OP ratio fluctuated between a low of 12.16 in January 2023 and a high of 19.12 in October 2021. A period of valuation contraction is evident between January 2022 and April 2023, during which the ratio remained largely below 14.00. A recovery phase followed, with the ratio ascending to 19.08 by October 2024, before entering a moderate downward trend toward 15.28 by May 2026.

Overall, the analysis indicates a strong correlation between share price movements and the P/OP ratio, while operating profit per share has remained comparatively resilient. The valuation cycles suggest periods of expansion and contraction that do not strictly mirror the operational profit trajectory, indicating the influence of external market factors on the stock's pricing.

The analysis of valuation metrics from May 2021 through May 2026 reveals a divergence between steady operational growth in revenue per share and a volatile equity market valuation. While the underlying sales capacity per share grew consistently, the price-to-sales ratio fluctuated primarily in response to shifts in the share price.

Sales per Share Performance

A sustained upward trend is observed in sales per share, rising from 132.94 USD in May 2021 to 167.07 USD by May 2026. This growth was characterized by a period of acceleration through late 2021, followed by a relative plateau between January 2023 and April 2024, and a subsequent secondary growth phase that continued through the end of the period.

Equity Price Volatility

The share price exhibited significant cyclicality, reaching peaks above 400 USD in October 2021, October 2024, and August 2025. Conversely, notable troughs occurred in May 2022 and January 2023, where prices declined below 300 USD. The final recorded price of 317.85 USD in May 2026 indicates a return toward the initial valuation levels observed at the start of the analysis period.

Price-to-Sales (P/S) Ratio Interpretation

The P/S ratio fluctuated between a high of 2.89 in October 2021 and a low of 1.86 in January 2023. Because sales per share grew in a linear and steady fashion, variations in the P/S ratio were driven predominantly by equity price movements rather than revenue volatility. A contraction phase is evident from May 2021 to January 2023, followed by an expansion phase that peaked at 2.61 in October 2024. The period from October 2024 to May 2026 shows a consistent compression of the multiple, concluding at 1.90.

The analysis of the Price to Book Value (P/BV) ratio reveals a transition from extreme volatility to a steady downward trend toward normalization. This evolution is primarily driven by a significant and consistent increase in the Book Value per Share (BVPS) rather than drastic changes in the market share price.

Book Value per Share (BVPS) Trend

BVPS exhibited significant instability during the initial period, descending into negative territory between January and May 2022. Following this trough, a sustained recovery phase began in mid-2022. From July 2022, when BVPS stood at 0.23, the value grew consistently, reaching 13.91 by May 2026. This represents a substantial expansion of the equity base over the observed timeframe.

P/BV Ratio Volatility and Convergence

The P/BV ratio experienced extreme fluctuations when the BVPS was near zero, resulting in an anomalous peak of 1,325.66 in July 2022. As the BVPS increased, the ratio began a systematic decline. A marked shift occurred after October 2023, where the ratio dropped from 359.76 to 22.84 by May 2026, indicating a convergence between the market valuation and the accounting book value.

Share Price Correlation

Throughout the period, the share price remained relatively range-bound, fluctuating between a low of 287.92 and a high of 408.37. Because the share price did not experience a proportional decline, the reduction in the P/BV ratio is attributable almost entirely to the growth in BVPS, suggesting a strengthening of the company's balance sheet relative to its market capitalization.