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Home Depot's Valuation Looks Expensive: Right Time to Buy or Wait?
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Key Takeaways
Home Depot trades at 18.8X forward P/E, above the industry's 16.77X, while its shares have fallen 14.1% YTD.
HD projects FY26 sales growth of 2.5-4.5%, supported by Pro expansion, acquisitions and digital gains.
Housing market pressures, rising costs and weak stock trends suggest investors may await a better entry point.
The Home Depot, Inc. (HD - Free Report) is trading at a forward 12-month price-to-earnings (P/E) multiple of 18.8X. This represents a premium to the industry average of 16.77X, indicating that investors are assigning the stock a higher valuation than its peers. However, HD’s current multiple remains below its one-year median P/E of 22.23X, suggesting that the stock is not expensive relative to its recent trading history. While the industry premium points to a stretched valuation, the discount to its historical median indicates that the overvaluation case is not clear-cut.
The company’s elevated price-to-sales (P/S) ratio affects enthusiasm. The leading home improvement retailer trades at a forward 12-month P/S of 1.68X, above the industry’s 1.13X. Together with its Value Score of C, this suggests that HD may not present a compelling value opportunity at the current levels despite its strong fundamentals and brand leadership.
Image Source: Zacks Investment Research
HD’s Premium Valuation Surpasses Peers
At 18.8X forward 12-month P/E, Home Depot is trading at a much higher valuation than its competitors. Its peers such as Lowe’s Companies Inc. (LOW - Free Report) , Haverty Furniture Companies (HVT - Free Report) and Somnigroup International Inc. (SGI - Free Report) are delivering solid growth and trade at more reasonable multiples. Lowe’s, Haverty Furniture and Somnigroup have forward 12-month P/E ratios of 14.77X, 11.51X and 16.45X — all significantly lower than that of HD. At such levels, HD’s valuation seems out of step with its growth trajectory, especially given the recent decrease in its stock price.
HD shares have lost 14.1% in the year-to-date period compared with the broader industry’s 17.7% decline. The stock has underperformed the Retail-Wholesale sector’s 1.8% decline and the S&P 500’s 14.5% growth in the same period.
Compared with peers, HD has shown relative resilience. Lowe’s and Somnigroup shares have fallen 21.7% and 30.1%, respectively, year to date, while HD’s decline has been less severe. However, Haverty Furniture has outperformed HD, posting a 17.8% gain in the same period.
HD’s YTD Stock Performance
Image Source: Zacks Investment Research
At the current price of $295.47, the HD stock trades 25.7% below its 52-week high of $397.63. The current stock price is 6.6% above its 52-week low mark of $277.15. HD trades below its 50 and 200-day moving averages, indicating bearish sentiment.
HD Trades Below 50 & 200-Day SMAs
Image Source: Zacks Investment Research
Home Depot: Key Growth Drivers & Challenges to Watch
HD continues to strengthen its competitive position in the home improvement market through strategic investments in its Pro business, digital capabilities, supply-chain efficiency and customer experience.
The company’s focus on expanding its product assortment, improving delivery speeds and enhancing interconnected shopping capabilities supports long-term growth opportunities. Its growing engagement with professional customers, alongside the integration of SRS Distribution and GMS, is expected to expand its reach across specialty building materials and strengthen its share of Pro spending.
Home Depot remains cautiously optimistic about its growth prospects, supported by investments in its Pro ecosystem, digital capabilities and supply-chain efficiencies. For fiscal 2026, the company reaffirmed its guidance, projecting total sales growth of 2.5-4.5% and comparable sales ranging from flat to 2% growth. It anticipates an adjusted operating margin of 12.8-13% and adjusted earnings per share growth of flat to 4%. The continued expansion of SRS Distribution, integration of GMS and enhanced cross-selling opportunities are expected to support market share gains.
The company is also benefiting from resilient demand for smaller repair and maintenance projects, product innovation and improving digital engagement. Online sales increased 11% in the second quarter of fiscal 2026, marking the fifth consecutive quarter of double-digit growth. Faster fulfillment, technology-enabled services and cross-selling opportunities across its distribution network should further support customer retention and market share gains.
However, near-term challenges persist. Elevated mortgage rates, weak housing turnover and affordability concerns continue to constrain larger discretionary remodeling projects. Rising fuel, energy and product input costs, alongside tariff-related pressures, are also creating margin headwinds.
Although these challenges could limit near-term growth, Home Depot’s expanding Pro ecosystem, operational improvements and investments in customer convenience provide a solid foundation for long-term growth as housing conditions normalize.
How Estimates Are Shaping Up for HD
The Zacks Consensus Estimate for Home Depot’s fiscal 2026 sales and EPS suggests 4.1% and 2.3% year-over-year increases, respectively. For fiscal 2027, the consensus estimate indicates 3.5% and 6.8% growth in sales and EPS, respectively.
The consensus estimate for HD’s fiscal 2026 EPS has moved up 0.1% in the past 30 days. Meanwhile, the estimate for fiscal 2027 EPS has been unchanged in the past 30 days.
Image Source: Zacks Investment Research
How to Approach HD Stock at Current Levels?
Home Depot’s premium valuation relative to its industry and peers reflects investors’ confidence in its strong market position, expanding Pro business and long-term growth prospects. Strategic investments in digital capabilities, supply-chain improvements and acquisitions provide a solid foundation for growth.
However, the stock’s recent share price decline, and its position below the 50-day and 200-day moving averages indicate weak near-term momentum. Persistent housing market challenges, subdued demand for larger remodeling projects and rising input costs further cloud the near-term outlook.
While Home Depot’s long-term fundamentals remain encouraging, its relatively high valuation, despite the recent stock price correction, limits its appeal at current levels. Given the combination of soft near-term growth prospects and bearish technical indicators, existing investors may consider retaining this Zacks Rank #3 (Hold) stock to benefit from its long-term growth potential. Meanwhile, new investors may prefer to wait for a more attractive entry point, particularly given the valuation premium, ongoing share price weakness and uncertainty surrounding a recovery in home improvement demand.
View the Zacks #1 Rank List
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Home Depot's Valuation Looks Expensive: Right Time to Buy or Wait?
Key Takeaways
The Home Depot, Inc. (HD - Free Report) is trading at a forward 12-month price-to-earnings (P/E) multiple of 18.8X. This represents a premium to the industry average of 16.77X, indicating that investors are assigning the stock a higher valuation than its peers. However, HD’s current multiple remains below its one-year median P/E of 22.23X, suggesting that the stock is not expensive relative to its recent trading history. While the industry premium points to a stretched valuation, the discount to its historical median indicates that the overvaluation case is not clear-cut.
The company’s elevated price-to-sales (P/S) ratio affects enthusiasm. The leading home improvement retailer trades at a forward 12-month P/S of 1.68X, above the industry’s 1.13X. Together with its Value Score of C, this suggests that HD may not present a compelling value opportunity at the current levels despite its strong fundamentals and brand leadership.
Image Source: Zacks Investment Research
HD’s Premium Valuation Surpasses Peers
At 18.8X forward 12-month P/E, Home Depot is trading at a much higher valuation than its competitors. Its peers such as Lowe’s Companies Inc. (LOW - Free Report) , Haverty Furniture Companies (HVT - Free Report) and Somnigroup International Inc. (SGI - Free Report) are delivering solid growth and trade at more reasonable multiples. Lowe’s, Haverty Furniture and Somnigroup have forward 12-month P/E ratios of 14.77X, 11.51X and 16.45X — all significantly lower than that of HD. At such levels, HD’s valuation seems out of step with its growth trajectory, especially given the recent decrease in its stock price.
HD shares have lost 14.1% in the year-to-date period compared with the broader industry’s 17.7% decline. The stock has underperformed the Retail-Wholesale sector’s 1.8% decline and the S&P 500’s 14.5% growth in the same period.
Compared with peers, HD has shown relative resilience. Lowe’s and Somnigroup shares have fallen 21.7% and 30.1%, respectively, year to date, while HD’s decline has been less severe. However, Haverty Furniture has outperformed HD, posting a 17.8% gain in the same period.
HD’s YTD Stock Performance
Image Source: Zacks Investment Research
At the current price of $295.47, the HD stock trades 25.7% below its 52-week high of $397.63. The current stock price is 6.6% above its 52-week low mark of $277.15. HD trades below its 50 and 200-day moving averages, indicating bearish sentiment.
HD Trades Below 50 & 200-Day SMAs
Image Source: Zacks Investment Research
Home Depot: Key Growth Drivers & Challenges to Watch
HD continues to strengthen its competitive position in the home improvement market through strategic investments in its Pro business, digital capabilities, supply-chain efficiency and customer experience.
The company’s focus on expanding its product assortment, improving delivery speeds and enhancing interconnected shopping capabilities supports long-term growth opportunities. Its growing engagement with professional customers, alongside the integration of SRS Distribution and GMS, is expected to expand its reach across specialty building materials and strengthen its share of Pro spending.
Home Depot remains cautiously optimistic about its growth prospects, supported by investments in its Pro ecosystem, digital capabilities and supply-chain efficiencies. For fiscal 2026, the company reaffirmed its guidance, projecting total sales growth of 2.5-4.5% and comparable sales ranging from flat to 2% growth. It anticipates an adjusted operating margin of 12.8-13% and adjusted earnings per share growth of flat to 4%. The continued expansion of SRS Distribution, integration of GMS and enhanced cross-selling opportunities are expected to support market share gains.
The company is also benefiting from resilient demand for smaller repair and maintenance projects, product innovation and improving digital engagement. Online sales increased 11% in the second quarter of fiscal 2026, marking the fifth consecutive quarter of double-digit growth. Faster fulfillment, technology-enabled services and cross-selling opportunities across its distribution network should further support customer retention and market share gains.
However, near-term challenges persist. Elevated mortgage rates, weak housing turnover and affordability concerns continue to constrain larger discretionary remodeling projects. Rising fuel, energy and product input costs, alongside tariff-related pressures, are also creating margin headwinds.
Although these challenges could limit near-term growth, Home Depot’s expanding Pro ecosystem, operational improvements and investments in customer convenience provide a solid foundation for long-term growth as housing conditions normalize.
How Estimates Are Shaping Up for HD
The Zacks Consensus Estimate for Home Depot’s fiscal 2026 sales and EPS suggests 4.1% and 2.3% year-over-year increases, respectively. For fiscal 2027, the consensus estimate indicates 3.5% and 6.8% growth in sales and EPS, respectively.
The consensus estimate for HD’s fiscal 2026 EPS has moved up 0.1% in the past 30 days. Meanwhile, the estimate for fiscal 2027 EPS has been unchanged in the past 30 days.
Image Source: Zacks Investment Research
How to Approach HD Stock at Current Levels?
Home Depot’s premium valuation relative to its industry and peers reflects investors’ confidence in its strong market position, expanding Pro business and long-term growth prospects. Strategic investments in digital capabilities, supply-chain improvements and acquisitions provide a solid foundation for growth.
However, the stock’s recent share price decline, and its position below the 50-day and 200-day moving averages indicate weak near-term momentum. Persistent housing market challenges, subdued demand for larger remodeling projects and rising input costs further cloud the near-term outlook.
While Home Depot’s long-term fundamentals remain encouraging, its relatively high valuation, despite the recent stock price correction, limits its appeal at current levels. Given the combination of soft near-term growth prospects and bearish technical indicators, existing investors may consider retaining this Zacks Rank #3 (Hold) stock to benefit from its long-term growth potential. Meanwhile, new investors may prefer to wait for a more attractive entry point, particularly given the valuation premium, ongoing share price weakness and uncertainty surrounding a recovery in home improvement demand.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.