Home Depot Inc. (NYSE:HD)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited a general upward trend from 2020 to 2022, increasing from approximately 12.86 billion to 18.15 billion USD. However, from 2022 onwards, NOPAT showed a decline, first slightly to around 18.17 billion in 2023 and then more markedly to 16.38 billion in 2024, before modestly recovering to 16.73 billion in 2025. This pattern indicates a peak in profitability in 2022 followed by some contraction in the subsequent years.

Cost of Capital

The cost of capital remained relatively stable over the observed periods, fluctuating mildly between 13.11% and 13.82%. The cost of capital reached its highest point in 2024 at 13.82%, before slightly declining to 13.54% in 2025. This stability suggests consistent financing conditions or risk perceptions in the market throughout the period.

Invested Capital

Invested capital increased substantially over the full period, starting at about 36.68 billion USD in 2020 and rising to 72.84 billion USD by 2025. The growth was not linear; it spiked between 2020 and 2021 with a significant jump to nearly 50 billion USD, followed by a slight decrease in 2022, then steady increases through 2023 and 2024, culminating in a marked rise in 2025. This pattern indicates substantial reinvestment or expansion activities, especially notable in recent years.

Economic Profit

Economic profit showed variability with a peak occurring in 2022 at approximately 11.57 billion USD. From 2020 to 2021, economic profit declined from about 8.05 billion to 7.39 billion USD. Following its peak in 2022, economic profit gradually decreased each year, reaching roughly 6.87 billion USD by 2025. The decline after 2022 may reflect increasing capital costs or reduced efficiency in generating returns above the cost of capital despite rising invested capital levels.

Net Earnings

Net earnings exhibit an overall upward trend from the initial value of 11,242 million US dollars in the period ending February 2, 2020, reaching a peak of 17,105 million US dollars by January 29, 2023. However, after this peak, there is a noticeable decline, with net earnings decreasing to 15,143 million US dollars in January 28, 2024, and further slightly declining to 14,806 million US dollars by February 2, 2025.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows an increasing pattern from 12,860 million US dollars in the period ending February 2, 2020, to reach 18,170 million US dollars as of January 29, 2023. Following this peak, there is a decline in the subsequent period to 16,384 million US dollars in January 28, 2024. However, unlike net earnings, NOPAT recovers slightly in the most recent period, increasing to 16,730 million US dollars by February 2, 2025.

Comparative Insights

Both net earnings and NOPAT follow a similar trend characterized by growth up to the period ending early 2023, followed by a reduction. The decline in net earnings is more consistent in the last two periods, whereas NOPAT experiences a partial recovery in the final period. This divergence could indicate changes in operational efficiency or tax impacts that warrant further examination. Overall, the data suggests a phase of growth culminating around 2023, with some signs of financial pressure or transitional changes in profitability thereafter.

The financial data reveals the trends in provision for income taxes and cash operating taxes over six consecutive years.

Provision for Income Taxes

From February 2020 to January 2021, the provision for income taxes increased significantly from 3,473 million US dollars to 4,112 million, representing a notable rise. This upward trend continued into January 2022, peaking at 5,304 million US dollars. However, in the following years, the provision began to decline slightly: decreasing to 5,372 million in January 2023, then further reducing to 4,781 million in January 2024, and ending at 4,600 million in February 2025. Overall, after an initial sharp rise through 2022, the provision for income taxes demonstrated a downward adjustment over the last three years in the dataset.

Cash Operating Taxes

Cash operating taxes showed a strong upward movement from 3,573 million US dollars in February 2020 to 5,040 million in January 2021. This increase continued into January 2022 with another rise to 5,876 million. The following year, January 2023, registered a slight decrease to 5,622 million, which continued with marginal declines in subsequent years: 5,482 million in January 2024 and 5,201 million in February 2025. This pattern indicates that after reaching a peak in early 2022, cash operating taxes began to taper moderately but remained considerably higher than the initial 2020 values.

In summary, both provision for income taxes and cash operating taxes experienced significant growth from 2020 through early 2022, indicating increased tax-related expenses or obligations during this period. Post-2022, both metrics showed a gradual decline, potentially reflecting changes in taxable income, tax strategies, or regulatory impacts. The consistent higher levels from 2021 onwards compared to 2020 suggest an overall increase in tax burden or profitability subject to tax over the six-year span.

The financial data reveals several notable trends in the company’s capital structure and financial position over the observed periods.

Total reported debt & leases

This figure exhibits a consistent upward trend throughout the periods, increasing from $37,377 million in early 2020 to $62,290 million by early 2025. The rise indicates a growing reliance on debt and lease obligations, which increased by nearly 67% over the five-year span.

Stockholders’ equity (deficit)

Stockholders’ equity fluctuates significantly, starting with a negative position of -$3,116 million in early 2020 and improving to a positive $3,299 million by early 2021. However, it swings back to a negative figure in early 2022 at -$1,696 million, before gradually increasing again to reach $6,640 million by early 2025. This volatility suggests periods of financial strain or restructuring, followed by recovery phases, ultimately resulting in a strengthened equity base.

Invested capital

Invested capital shows an overall increasing pattern, beginning at $36,678 million in 2020, rising to $49,973 million in 2021, and experiencing some fluctuations before reaching a peak of $72,841 million in 2025. This growth reflects increased capital deployment, possibly through investments, acquisitions, or asset expansion aligning with the rise in debt levels.

In summary, the company appears to have expanded its capital base and debt load significantly over the period, while stockholders’ equity demonstrated volatility but ultimately improved. The overall increase in invested capital alongside growing debt indicates a strategy of leveraging to finance growth or operations, which has enhanced the total resources employed in the business.

Economic Profit

The economic profit exhibited fluctuation over the analyzed period. Starting at $8,053 million, it decreased to $7,393 million the following year, followed by a notable increase to $11,574 million. Subsequently, economic profit declined progressively to $6,869 million in the final year. This indicates an overall downward trend in economic profit after a peak in the mid-period.

Invested Capital

Invested capital showed a consistent increasing trend throughout the years. Beginning at $36,678 million, it grew steadily and significantly, reaching $72,841 million by the end of the period. This suggests ongoing investment and expansion activities contributing to the company's capital base.

Economic Spread Ratio

The economic spread ratio, reflecting the return on invested capital relative to the cost of capital, demonstrated volatility and a declining trajectory. Initially at approximately 21.96%, it dropped to 14.79%, rose again to a peak of 23.96%, and then continuously declined to 9.43% in the final year. This downward trend in the latter years indicates diminishing profitability relative to invested capital.

Overall Analysis

The data indicates that while the company expanded its invested capital base significantly over the years, the efficiency and profitability of such investments, as seen in economic profit and economic spread ratio, have declined after peaking. This pattern suggests that returns on the expanded capital have been decreasing, potentially reflecting increased costs, competitive pressures, or other operational challenges affecting overall economic value generation.

Economic Profit

The economic profit exhibited fluctuations over the observed periods. Starting at 8,053 million USD, it declined to 7,393 million USD in the subsequent year. This was followed by a significant rise to 11,574 million USD by the third period. However, thereafter, a downward trend occurred, with values decreasing to 10,738 million USD, then further dropping to 8,659 million USD, and finally reaching 6,869 million USD in the latest period. Overall, economic profit peaked in the third period and has shown a declining trajectory since.

Adjusted Net Sales

The adjusted net sales demonstrated a generally positive growth trend throughout the periods. Beginning at 110,559 million USD, the figure increased steadily each year, reaching 132,817 million USD, then 151,930 million USD, and climbed marginally to 156,871 million USD in the fourth period. Though there was a slight decrease to 152,367 million USD in the fifth period, the sales increased again to 159,362 million USD by the latest period. This indicates an overall growth pattern in sales with minor variability in the penultimate year.

Economic Profit Margin

The economic profit margin showed variation aligned with changes in economic profit. It began at 7.28%, decreased to 5.57% in the second period, then rose to 7.62% by the third period, indicating peak profitability. Subsequently, the margin declined progressively to 6.85%, 5.68%, and finally 4.31% in the most recent period. This downward trend suggests diminishing profitability relative to sales despite generally increasing net sales.

Summary

The data reflect a scenario where net sales have generally increased over time, suggesting expansion or increased market activity. Conversely, economic profit and economic profit margin have experienced a peak in the mid-period followed by a notable decline. This divergence implies that while revenue generation has grown, the efficiency or value creation from these sales has diminished in recent periods. Factors such as rising costs, competitive pressures, or changes in operational efficiency could be influencing the reduced profitability margins and economic profit despite higher sales volumes.