HD
HD
Accumulate 2026-03-03
Model
DCF
Price at Report
$366.92
Base IV
$427.36
Bear IV
$202.11
Bull IV
$633.72
Entry Zone: 330-366 · Sell Above: 480
Bore Family Office
Valuation Report — The Home Depot, Inc. (HD) • March 3, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 7.50% • Current Price: $366.92
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Home Depot (NYSE: HD) is the world's largest home improvement retailer, founded in 1978 in Atlanta, GA by Bernie Marcus and Arthur Blank. From its first two stores in suburban Atlanta, the company pioneered the big-box home improvement warehouse concept and grew to become a Fortune 20 company with over 2,340 stores across the US, Canada, and Mexico.
Business Segments:
- Retail (~97% of revenue, ~$160B): Big-box home improvement stores averaging ~104,000 sq ft. Serves two primary customer groups: DIY consumers (~50% of sales) and professional contractors/tradespeople (~50%). Pro customers transact more frequently, spend more per visit, and have been the growth engine as DIY activity moderated post-COVID.
- SRS Distribution (acquired June 2024, ~$6–7B revenue, growing): HD's largest ever acquisition ($18.25B) transformed the Pro strategy. SRS distributes roofing, landscaping, and pool products directly to specialty contractors — a segment historically underserved by retail stores. SRS adds dedicated fleet delivery, contractor accounts, and product categories outside the traditional big-box assortment. The acquisition added ~$15B of net debt but is strategically critical to HD's ambition of serving the full Pro lifecycle.
Segment trajectory: The core retail segment faces near-term pressure from the housing market — existing home sales are near 30-year lows as mortgage rates suppress turnover. Comparable store sales have been negative for two consecutive years (FY2025: -1.8%). SRS is growing fast (double-digit organic revenue growth) and expanding HD's total addressable market with the Pro segment. The medium-term thesis rests on: (1) housing market normalization as rates eventually moderate, (2) SRS synergies accelerating Pro capture, and (3) the long secular trend of aging US housing stock requiring renovation.
📊 Financial Snapshot
| Metric | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|
| Revenue ($M) | $151,157 | $157,403 | $152,669 | $159,514 | $164,683 |
| EBITDA ($M) | $25,902 | $27,014 | $24,936 | $25,287 | $25,011 |
| Operating Income ($M) | $23,040 | $24,039 | $21,689 | $21,526 | $20,890 |
| Net Income ($M) | $16,433 | $17,105 | $15,143 | $14,806 | $14,156 |
| EPS (diluted) | $15.53 | $16.69 | $15.11 | $14.91 | $14.23 |
| Free Cash Flow ($M) | $14,005 | $11,496 | $17,946 | $16,325 | $12,646 |
| Annual DPS | $6.850 | $7.790 | $8.520 | $9.050 | $9.230 |
| Total Debt ($M) | $46,269 | $51,142 | $53,101 | $63,085 | $65,350 |
| Rev YoY Growth | — | +4.1% | -3.0% | +4.5% | +3.2% |
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.30% | 10-yr US Treasury yield |
| Beta (β) | 1.046 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 10.05% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 3.69% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 2.81% | × (1 − 24%) |
| Weight Equity (We) | 84.8% | Mkt cap $0.0B |
| Weight Debt (Wd) | 15.2% | Gross debt $0.0B |
| WACC | 7.50% | DCF discount rate |
📈 DCF Scenarios
$202
🔴 Bear
$427
📊 Base
$634
🚀 Bull
$366.92
Current Price
$426
Analyst Avg PT
📋 Full 10-Year Projection Tables
Bear Scenario
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $15.60B | $14.38B | $14.38B |
| Year 2 | Stage 1 | $16.22B | $13.78B | $28.16B |
| Year 3 | Stage 1 | $16.87B | $13.21B | $41.37B |
| Year 4 | Stage 1 | $17.55B | $12.66B | $54.03B |
| Year 5 | Stage 1 | $18.25B | $12.14B | $66.17B |
| Year 6 | Stage 2 | $18.80B | $11.52B | $77.69B |
| Year 7 | Stage 2 | $19.36B | $10.94B | $88.63B |
| Year 8 | Stage 2 | $19.94B | $10.38B | $99.01B |
| Year 9 | Stage 2 | $20.54B | $9.86B | $108.87B |
| Year 10 | Stage 2 | $21.16B | $9.36B | $118.23B |
| Terminal | — | TV=$332.0B | PV(TV)=$146.8B (55% of EV) | EV=$265.1B |
Base Scenario
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $16.35B | $15.21B | $15.21B |
| Year 2 | Stage 1 | $17.82B | $15.42B | $30.63B |
| Year 3 | Stage 1 | $19.43B | $15.64B | $46.27B |
| Year 4 | Stage 1 | $21.17B | $15.85B | $62.12B |
| Year 5 | Stage 1 | $23.08B | $16.08B | $78.20B |
| Year 6 | Stage 2 | $24.35B | $15.78B | $93.98B |
| Year 7 | Stage 2 | $25.69B | $15.48B | $109.46B |
| Year 8 | Stage 2 | $27.10B | $15.20B | $124.65B |
| Year 9 | Stage 2 | $28.59B | $14.91B | $139.57B |
| Year 10 | Stage 2 | $30.16B | $14.64B | $154.20B |
| Terminal | — | TV=$690.4B | PV(TV)=$335.0B (68% of EV) | EV=$489.2B |
Bull Scenario
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $16.95B | $15.84B | $15.84B |
| Year 2 | Stage 1 | $19.15B | $16.73B | $32.57B |
| Year 3 | Stage 1 | $21.64B | $17.67B | $50.24B |
| Year 4 | Stage 1 | $24.46B | $18.66B | $68.90B |
| Year 5 | Stage 1 | $27.64B | $19.70B | $88.60B |
| Year 6 | Stage 2 | $29.57B | $19.70B | $108.31B |
| Year 7 | Stage 2 | $31.64B | $19.70B | $128.01B |
| Year 8 | Stage 2 | $33.86B | $19.70B | $147.71B |
| Year 9 | Stage 2 | $36.23B | $19.70B | $167.42B |
| Year 10 | Stage 2 | $38.76B | $19.70B | $187.12B |
| Terminal | — | TV=$998.1B | PV(TV)=$507.4B (73% of EV) | EV=$694.5B |
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.5% | $558 | $625 | $714 | $839 | $1026 |
| 6.0% | $485 | $535 | $599 | $684 | $804 |
| 6.5% | $427 | $465 | $513 | $574 | $656 |
| 7.0% | $379 | $409 | $446 | $492 | $550 |
| 7.5% | $340 | $363 | $392 | $427 | $471 |
| 8.0% | $306 | $326 | $349 | $376 | $410 |
| 8.5% | $278 | $294 | $312 | $334 | $361 |
| 9.0% | $253 | $266 | $281 | $299 | $320 |
| 9.5% | $231 | $242 | $255 | $270 | $287 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
🏦 Comparable Valuation
| Metric | HD (current) | LOW (Lowe's) | HD 5-yr Avg | HD 10-yr Avg |
|---|---|---|---|---|
| P/E (NTM) | 23.7x | 20.1x | ~22x | ~21x |
| EV/EBITDA | 16.2x | 14.8x | ~15x | ~14x |
| P/FCF | 25.8x | 22.3x | ~24x | ~22x |
| Dividend Yield | 2.5% | 1.8% | ~2.0% | ~2.1% |
| ROIC | ~32% | ~25% | ~35% | ~30% |
| Revenue Growth | +3.2% | +2.1% | ~5.5% | ~6.2% |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $9.230 |
| Current Yield | 2.51% |
| Consecutive Growth Years | 14 |
| 1-yr DPS CAGR | +2.0% |
| 3-yr DPS CAGR | +9.3% |
| 5-yr DPS CAGR | +12.0% |
| 10-yr DPS CAGR | +18.0% |
| Payout Ratio (DPS/EPS) | 64.9% |
| FCF Payout Ratio | 73.0% |
| Sustainability Verdict | ✅ Safe |
HD's dividend is well-covered by free cash flow ($12.6B FCF vs ~$9.2B in dividends). The FY2026 raise of +2.0% (to $9.23/share) extends the consecutive growth streak to 14 years. Payout ratio of 65% (EPS) and 73% (FCF) are healthy — elevated post-SRS integration but declining as FCF recovers. Even in the bear case, FCF remains sufficient to maintain the dividend. Dividend is not at risk in any scenario.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $15.53 | — | — | — | Actual |
| 2023 | $16.69 | — | — | — | Actual |
| 2024 | $15.11 | — | — | — | Actual |
| 2025 | $14.91 | — | — | — | Actual |
| 2026 | $14.23 | — | — | — | Actual |
| 2027 | $14.50 | $15.50 | $16.80 | 32 | Estimate |
| 2028 | $15.80 | $17.20 | $19.10 | 28 | Estimate |
| 2029 | $17.20 | $19.10 | $21.50 | 18 | Estimate |
| 2030 | $18.50 | $21.00 | $24.00 | 12 | Estimate |
| 2031 | $20.00 | $23.00 | $26.50 | 8 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $151.2B | — | — | — | Actual |
| 2023 | $157.4B | — | — | — | Actual |
| 2024 | $152.7B | — | — | — | Actual |
| 2025 | $159.5B | — | — | — | Actual |
| 2026 | $164.7B | — | — | — | Actual |
| 2027 | $162.0B | $167.5B | $173.0B | 32 | Estimate |
| 2028 | $166.0B | $173.5B | $182.0B | 28 | Estimate |
| 2029 | $170.0B | $180.0B | $191.0B | 18 | Estimate |
| 2030 | $174.0B | $187.0B | $200.0B | 12 | Estimate |
| 2031 | $178.0B | $194.0B | $209.0B | 8 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $426.41 | Range $330–$520
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Steven Zaccone | Citi | Buy | $460 | +25.4% |
| Kate McShane | Goldman Sachs | Buy | $455 | +24.0% |
| Simeon Gutman | Morgan Stanley | Overweight | $450 | +22.6% |
| Steven Forbes | Barclays | Overweight | $440 | +19.9% |
| Greg Melich | Evercore ISI | Outperform | $435 | +18.6% |
| Chris Horvers | JP Morgan | Overweight | $430 | +17.2% |
| Michael Lasser | UBS | Buy | $425 | +15.8% |
| Seth Sigman | Wells Fargo | Overweight | $420 | +14.5% |
| Zach Fadem | Jefferies | Buy | $415 | +13.1% |
| Peter Benedict | Baird | Outperform | $410 | +11.7% |
| Charles Cerankosky | Northcoast | Neutral | $385 | +4.9% |
| Robby Ohmes | BofA Securities | Neutral | $375 | +2.2% |
| Brian Nagel | Oppenheimer | Neutral | $370 | +0.8% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q3 FY2026 (Nov 25) | $3.67 vs $3.64 | +$0.03 ✅ | $40.2B vs $39.3B | +$0.9B ✅ | Maintained FY2026 guide |
| Q2 FY2026 (Aug 25) | $4.67 vs $4.59 | +$0.08 ✅ | $43.2B vs $43.0B | +$0.2B ✅ | Raised low end |
| Q1 FY2026 (May 25) | $3.56 vs $3.59 | $-0.03 ❌ | $39.9B vs $39.3B | +$0.6B ✅ | FY2026 guidance issued |
| Q4 FY2025 (Feb 25) | $3.13 vs $3.04 | +$0.09 ✅ | $39.7B vs $39.0B | +$0.7B ✅ | Issued FY2026 guidance |
(e) Confidence Band Commentary
The analyst range is relatively tight for a large-cap retailer ($330–$520 = 57% spread), reflecting reasonable consensus around the base case. Comps-sensitivity is the primary source of disagreement — bulls model housing normalization in 2026, bears do not. HD has beaten EPS estimates in 3 of the last 4 quarters, often on better-than-expected ticket size. The miss in Q1 FY2026 was narrow (−$0.03) and attributed to weather. Beat-rate pattern is reliable — estimates are typically set conservatively.
💡 Investment Thesis
Bull Case — What has to be true:
- Mortgage rates decline toward 5.5–6% in 2026–2027, unlocking pent-up existing home sales
- SRS integration executes ahead of schedule — Pro revenue ramp exceeds management guidance
- Comparable store sales return to +3–4% by FY2027, rebuilding operating leverage
- ROIC remains best-in-class as SRS scales; multiple re-rating toward 26–28x NTM earnings
Bear Case — Real risks:
- Prolonged housing freeze: Rates stay at 6.5%+ through 2028 → comps remain negative, bear case IV of $202 becomes realistic
- SRS leverage burden: $15B of incremental debt at higher rates; if Pro market softens, interest coverage tightens
- Consumer discretionary compression: Big-ticket projects (kitchens, bathrooms) are first cut in recessions; HD revenue is more cyclical than many realize
- Tariff risk: Lumber and building materials heavily exposed to Canada/Mexico tariffs currently under consideration
Base Case Assumptions:
- Housing market begins normalizing in late 2026 — modest comp sales recovery to +2–3% by FY2027
- SRS synergies ramp over 18–24 months — $500M+ annualized by FY2028
- FCF recovers toward $16–17B as SRS integration spend normalizes
- Dividend growth continues at 6–8%/yr — 14-year growth streak intact
⚖️ DCF Verdict: Accumulate — The Home Depot, Inc. (HD)
Current price: $366.92 | Analyst Avg PT: $426.41
$202
🔴 Bear
$427
📊 Base
$634
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$366 | Begin position |
| Tier 2 — Add | ≤$345 | Add on weakness |
| Tier 3 — Full | ≤$330 | Full allocation |
| Sell Alert | ≥$480 | Above fair value — consider trimming |
HD is trading at $367 — at the top of the Starter entry zone. The market is pricing in a prolonged housing freeze (WACC 7.5% / terminal g ~1.5%). If housing normalizes in 2026–2027, buying here offers 16% upside to base case fair value of $427 plus a 2.5% dividend yield while you wait. The dividend is safe in all scenarios.
Key catalyst: Q1 FY2027 earnings (May 2026) — first positive comparable sales reading would confirm housing inflection and re-rate toward $420–440. Watch comp sales guidance carefully.
Current position context: You hold 79 shares @ $350.22 avg cost — already in the entry zone, +5.5% unrealized. Consider whether to add on further weakness toward $345.
Key catalyst: Q1 FY2027 earnings (May 2026) — first positive comparable sales reading would confirm housing inflection and re-rate toward $420–440. Watch comp sales guidance carefully.
Current position context: You hold 79 shares @ $350.22 avg cost — already in the entry zone, +5.5% unrealized. Consider whether to add on further weakness toward $345.
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 79 |
| Average Cost Basis | $350.22 |
| Current Market Value | $28,987 |
| Unrealized P&L | $+1,319 (+4.8%) |
| Annual Dividend Income | $729/yr |
| Yield on Cost | 2.64% |
| vs Target Position (~$200K) | $28,987 vs $200,000 (14% of target) |
Bore Family Office • Analysis generated by Lurch • Not investment advice.