TenQ

The Home Depot story

Home Depot is the largest home improvement retailer, expanding into specialty contractor distribution as it tests whether SRS and GMS can strengthen growth without further margin pressure.

Written from Home Depot's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $289.89share price, last close
  • $289.2Bmarket value
  • 17/36TenQ Score checks passed
  • 7.9%growth a year the price assumes

The story in brief

  • Contractors reshape the business. The acquisitions of SRS in fiscal 2024 and GMS in fiscal 2025 extended Home Depot into roofing, landscaping, pool supplies and specialty interior building products.
  • Spending offsets fewer transactions. In the quarter to August 2026, comparable sales rose 1.7% as comparable average ticket increased 2.8%, while customer transactions excluding HD Supply and SRS declined to 443.2 million from 446.8 million.
  • Operating cash flow improves. In the six months to August 2026, operating cash flow rose to $11,422 million from $8,968 million in the prior comparable period, against capital expenditures of $1,724 million.

What drives the business

  • Home Depot's contractor strategy extends beyond its retail stores through SRS, acquired in fiscal 2024, and SRS's acquisition of GMS in fiscal 2025.
  • SRS serves professional roofers, landscapers and pool contractors, while GMS adds drywall, ceilings, steel framing and complementary construction products.
  • The Primary segment combines the U.S., Canadian and Mexican retail businesses, offering homeowners and contractors building materials, home improvement products, installation services and equipment rentals.
  • At the end of the quarter to August 2026, Home Depot operated 2,364 retail stores and over 1,340 SRS locations, supported by delivery capabilities, dedicated contractor sales teams and trade credit offerings.
  • Sales reached $47.9 billion in the quarter to August 2026, up 5.7%, while U.S. comparable sales increased 1.3% as customers continued engaging in smaller projects.

What the price assumes

At $289.89, the reverse DCF implies free cash flow after stock pay growing 7.9% a year for ten years, using a 10.2% discount rate.

Home Depot delivered 8.5% annual growth in that measure over the last 10 years, but the TenQ check sets a lower bar of 6.2%, slowing that record halfway toward 4%.

The implied growth exceeds that check's bar, while revenue growth over the last twelve months was 2.5%, a different measure that illustrates the slower pace of business expansion.

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What could change the story

  • Sales growth has not prevented margin pressure, with operating margin falling to 14.3% in the quarter to August 2026 from 14.5% in the comparable prior period.
  • Fiscal 2026 guidance includes tariff refunds expected to partially offset unplanned fuel, energy and other product input costs, leaving the outlook sensitive to those offsets.
  • Total debt of $48.2 billion against $2.1 billion in cash and short-term investments makes continued cash generation important, while the near-term liquidity check falls short at 1.08 against a 1.50 bar.
  • The contractor expansion also depends on realizing the benefits of SRS and GMS, including the customer relationships and distribution capabilities acquired with those businesses.

What to watch next

  • Home Depot reaffirmed fiscal 2026 guidance for total sales growth of approximately 2.5% to 4.5% and comparable sales growth of approximately flat to 2.0%.
  • Comparable transactions and average ticket are the measures to follow for evidence that demand is broadening beyond higher spending per transaction.
  • Gross margin of approximately 33.1% and adjusted operating margin of approximately 12.8% to 13.0% are the company's fiscal 2026 benchmarks for managing costs alongside expansion.
  • The next cash flow statements can show whether operating cash generation remains strong beyond the working capital benefit recorded in the six months to August 2026, with fiscal 2026 capital expenditures guided to approximately 2.5% of total sales.

Sources

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