Home Depot Inc. (NYSE:HD)

The financial ratios presented demonstrate varying trends over the six-year period. Generally, adjusted ratios exhibit similar patterns to their reported counterparts, though magnitude differences exist. Several key areas show notable shifts, particularly in leverage and asset utilization. Overall, a trend towards increased financial stability and potentially reduced risk is observed in the later years of the period.

Asset Turnover

Both reported and adjusted total asset turnover ratios initially increased between 2021 and 2022, then plateaued in 2023 before declining consistently through 2026. This suggests a decreasing efficiency in utilizing assets to generate revenue. The adjusted ratio consistently shows a slightly higher value than the reported ratio, indicating potential impacts from accounting adjustments.

Liquidity

The reported current ratio fluctuated, decreasing from 2021 to 2022, increasing in 2023, and then declining again through 2026. The adjusted current ratio follows a similar pattern but consistently presents a higher value, suggesting adjustments improve the liquidity position. Both ratios remain above one throughout the period, indicating sufficient current assets to cover current liabilities, though the trend suggests a potential weakening of short-term liquidity.

Leverage

Reported debt to equity and financial leverage ratios experienced significant increases between 2021 and 2024, peaking in 2024 before substantial declines through 2026. Adjusted ratios show a similar trend, but with lower magnitudes, particularly in the earlier years. The adjusted debt to equity ratio demonstrates a more moderate increase and subsequent decrease. Reported debt to capital remained relatively stable between 2021 and 2023, then decreased in the later years, mirroring the trend in adjusted debt to capital. The substantial differences between reported and adjusted debt ratios suggest significant impacts from accounting adjustments related to debt and equity.

Profitability

Reported net profit margin increased from 2021 to 2022, remained stable in 2023, and then declined through 2026. The adjusted net profit margin follows a similar pattern, with minor differences in magnitude. Both reported and adjusted return on assets (ROA) followed a similar trend, peaking in 2022 and declining through 2026. The reported return on equity (ROE) experienced dramatic fluctuations, peaking in 2024 before a significant decline. The adjusted ROE is considerably lower and exhibits a more moderate decline, indicating that adjustments significantly impact the reported ROE.

In summary, the company experienced a period of increasing leverage followed by a reduction, alongside a general decline in asset turnover and profitability metrics. The adjustments made to the financial ratios consistently moderate the reported values, particularly in the case of leverage and ROE, suggesting a substantial impact from accounting practices. The trend towards lower leverage in the later years indicates a strengthening financial position.

The adjusted total asset turnover ratio for the period examined demonstrates a generally declining trend, although fluctuations are present. Initial values indicate a relatively strong utilization of assets, which subsequently decreases over the observed timeframe.

Overall Trend

From January 31, 2021, to February 1, 2026, the adjusted total asset turnover ratio exhibits a decrease from 1.89 to 1.57. This suggests a diminishing efficiency in generating net sales from the company’s asset base.

Initial Period (2021-2022)

The ratio increased from 1.89 in 2021 to 2.12 in 2022. This represents an improvement in asset utilization, indicating that the company generated more sales per dollar of assets during this period. This increase coincides with a rise in adjusted net sales.

Subsequent Period (2022-2024)

Following the peak in 2022, the ratio experienced a slight decline to 2.06 in 2023 and further to 2.00 in 2024. While still relatively high, this indicates a gradual reduction in the efficiency of asset utilization. Adjusted net sales remained relatively stable during this period, while adjusted total assets increased.

Recent Period (2024-2026)

The most recent period shows a more pronounced decrease, with the ratio falling to 1.66 in 2025 and 1.57 in 2026. This decline is concurrent with a substantial increase in adjusted total assets, while adjusted net sales experienced more moderate growth. The increasing asset base, without a proportional increase in sales, is the primary driver of this downward trend.

Comparison to Reported Ratio

The adjusted total asset turnover ratio remains consistent with the reported total asset turnover ratio throughout the period. Any differences between the two are minimal, suggesting that the adjustments made do not significantly alter the overall interpretation of asset utilization efficiency.

In summary, while the company initially demonstrated improving asset turnover, a consistent downward trend is observed in the latter part of the analyzed period. This trend warrants further investigation to determine the underlying causes and potential strategies for improving asset utilization.

The adjusted current ratio exhibited a fluctuating pattern over the observed period. Initially, the ratio increased from 1.40 in January 2021 to a peak of 1.62 in January 2023, before declining to 1.22 in February 2025 and stabilizing at 1.15 in February 2026.

Overall Trend

While demonstrating variability, the adjusted current ratio generally remained above 1.15 throughout the period, suggesting a consistent ability to cover short-term obligations with adjusted current assets. The initial increase indicates improving liquidity, followed by a moderate decline in the most recent two years.

Year-over-Year Changes

A notable increase in the adjusted current ratio occurred between January 2021 and January 2023, rising from 1.40 to 1.62. This improvement coincided with increases in both adjusted current assets and adjusted current liabilities, but the growth in assets outpaced that of liabilities. Subsequently, a decrease was observed between January 2023 and February 2025, falling to 1.22, driven by a larger increase in adjusted current liabilities compared to adjusted current assets. The ratio experienced a slight decrease from February 2025 to February 2026.

Comparison with Reported Current Ratio

The adjusted current ratio consistently exceeded the reported current ratio across all observed periods. This difference suggests that the adjustments made to current liabilities positively impacted the liquidity position as measured by this ratio. The magnitude of the difference varied, but the adjusted ratio consistently presented a more favorable liquidity picture.

Adjusted Current Liabilities Impact

The adjustments to current liabilities appear to have a significant effect on the ratio. Fluctuations in adjusted current liabilities directly correlate with changes in the adjusted current ratio. The largest increases in adjusted current liabilities between 2021 and 2022, and again between 2024 and 2026, corresponded with decreases in the adjusted current ratio.

In summary, the adjusted current ratio demonstrates a generally healthy liquidity position, although recent periods show a slight downward trend. The adjustments to current liabilities are a key factor influencing the ratio’s value and should be further investigated to understand their composition and impact on the company’s short-term financial health.

The adjusted debt to equity ratio exhibits considerable fluctuation over the observed period. Initially, the ratio decreased from 6.25 in January 2021 to 5.69 in January 2025, before continuing to decline to 3.64 in February 2026. This suggests a strengthening of the equity position relative to debt over the latter part of the period, although the earlier years show a different pattern.

Total Debt

Total debt consistently increased from US$37,238 million in January 2021 to US$55,772 million in February 2026. The rate of increase appears relatively stable year-over-year, with a slight acceleration observed between January 2024 and February 2026.

Stockholders’ Equity

Stockholders’ equity experienced a period of deficit in January 2022, reaching -US$1,696 million. Following this, equity demonstrated a recovery, increasing to US$12,813 million in February 2026. This substantial growth in equity likely contributes to the observed decline in the adjusted debt to equity ratio in the later years.

Adjusted Debt to Equity Ratio - Early Period (2021-2022)

The adjusted debt to equity ratio increased significantly from 6.25 in January 2021 to 18.77 in January 2022. This increase coincided with the negative stockholders’ equity balance, indicating a substantial reliance on debt financing during that period.

Adjusted Debt to Equity Ratio - Later Period (2023-2026)

From January 2023 through February 2026, the adjusted debt to equity ratio decreased from 9.46 to 3.64. This decline is attributable to the growth in adjusted stockholders’ equity outpacing the increase in adjusted total debt. The rate of decline slowed between January 2025 and February 2026.

The difference between reported and adjusted figures suggests the adjustments involve modifications to either debt or equity components. The consistent increase in total debt, coupled with the recovery and subsequent growth of stockholders’ equity, has resulted in a more favorable adjusted debt to equity position by the end of the analyzed period.

The adjusted debt to capital ratio exhibits a fluctuating pattern over the observed period. Initially, the ratio increased from 0.86 in January 2021 to 0.95 in January 2022, before decreasing to 0.90 in January 2023 and slightly increasing to 0.92 in January 2024. A more pronounced decrease is then observed, with the ratio falling to 0.85 in February 2025 and further to 0.78 in February 2026.

Total Debt

Total debt consistently increased from US$37,238 million in January 2021 to US$55,772 million in February 2026. The rate of increase appeared to accelerate between January 2024 and February 2025, with a larger absolute increase compared to prior periods.

Total Capital

Total capital demonstrated a more variable trend. It decreased from US$40,537 million in January 2021 to US$38,390 million in January 2022, then increased to US$44,755 million in January 2023 and US$45,155 million in January 2024. Subsequent increases were more substantial, reaching US$60,023 million in February 2025 and US$68,585 million in February 2026.

Adjusted Debt to Capital Ratio - Trend Analysis

The initial increase in the adjusted debt to capital ratio between 2021 and 2022 suggests a greater reliance on debt financing relative to capital. However, the subsequent decline from 2023 through 2026 indicates that capital growth outpaced debt accumulation. The most significant decrease in the ratio occurred between February 2025 and February 2026, coinciding with a substantial increase in total capital.

Adjusted vs. Reported Debt to Capital

The adjusted debt to capital ratio is consistently lower than the reported debt to capital ratio across all observed periods. This suggests that the adjustments made to total debt and total capital result in a more conservative assessment of the company’s leverage. The difference between the reported and adjusted ratios remained relatively stable throughout the period.

Overall, the trend in the adjusted debt to capital ratio suggests improving financial leverage over the analyzed timeframe, particularly in the later years. The increasing capital base, coupled with continued, but proportionally slower, debt growth, contributed to this improvement.

The financial leverage metrics exhibit considerable fluctuation over the observed period. Reported financial leverage initially increased significantly between 2021 and 2023, peaking at 73.30 in 2024 before declining substantially in subsequent years. Adjusted financial leverage demonstrates a different pattern, with a more moderate increase followed by a consistent decline beginning in 2024.

Total Assets & Stockholders’ Equity

Total assets generally increased throughout the period, with a substantial jump between 2024 and 2025, and continued growth into 2026. Stockholders’ equity experienced a deficit in 2022 before recovering and exhibiting strong growth from 2023 onwards, mirroring the asset trend. The difference between total assets and stockholders’ equity is significant, contributing to the high leverage ratios.

Reported Financial Leverage

Reported financial leverage began at 21.39 in 2021. A value for 2022 is missing, but the ratio increased sharply to 48.94 in 2023 and further to 73.30 in 2024. This was followed by a marked decrease to 14.48 in 2025 and a further decline to 8.20 in 2026. This volatility suggests significant changes in the company’s capital structure or debt levels as reported.

Adjusted Financial Leverage

Adjusted financial leverage started at 10.11 in 2021 and increased to 29.02 in 2022. It then decreased to 14.29 in 2023 and 17.50 in 2024. Similar to the reported leverage, a downward trend is observed from 2024, with the ratio falling to 8.76 in 2025 and 5.84 in 2026. The adjusted leverage consistently remains lower than the reported leverage throughout the period.

The divergence between reported and adjusted financial leverage suggests that adjustments are being made to either the asset or equity base. The consistent decline in both leverage metrics from 2024 to 2026 indicates a strengthening financial position, potentially through debt reduction or equity increases. The substantial growth in both total assets and stockholders’ equity in the later years supports this conclusion.

The adjusted net profit margin exhibited fluctuations over the observed six-year period. Initially, the metric demonstrated growth, followed by a period of decline and a subsequent partial recovery.

Overall Trend

From January 31, 2021, to February 1, 2026, the adjusted net profit margin generally decreased, although not consistently. The margin peaked at 11.14% in January 30, 2022, before experiencing a decline to 8.76% by February 2, 2025, and then partially recovering to 9.17% by February 1, 2026.

Growth Phase (2021-2022)

The adjusted net profit margin increased from 9.81% in 2021 to 11.14% in 2022. This represents a substantial improvement, indicating increased profitability relative to adjusted sales during this period. The increase in adjusted net earnings outpaced the increase in adjusted net sales.

Decline Phase (2022-2025)

Following the peak in 2022, the adjusted net profit margin decreased steadily through 2025. The margin fell to 10.64% in 2023, 9.75% in 2024, and further to 8.76% in 2025. This suggests that while adjusted net sales continued to grow, adjusted net earnings did not keep pace, resulting in reduced profitability. The rate of decline slowed between 2024 and 2025.

Partial Recovery (2025-2026)

The adjusted net profit margin experienced a slight recovery in 2026, increasing to 9.17%. This indicates a stabilization of profitability, although the margin remained below the levels observed in 2021 and 2022. Adjusted net earnings increased while adjusted net sales also increased, contributing to the improved margin.

Comparison to Reported Margin

The adjusted net profit margin consistently differed from the reported net profit margin across all periods. The adjusted margin was generally higher than the reported margin, suggesting that adjustments increased reported profitability. The trends observed in both margins were similar, but the magnitude of the fluctuations differed.

The observed fluctuations in the adjusted net profit margin warrant further investigation to determine the underlying drivers. Factors such as changes in cost of goods sold, operating expenses, and non-recurring items could contribute to these trends.

The adjusted return on equity (ROE) exhibited considerable fluctuation over the observed period. Initial values demonstrate a substantial increase followed by a declining trend. Net earnings generally decreased from 2023 to 2026, while stockholders’ equity showed a consistent increase throughout the period, albeit from a negative value in 2022.

Adjusted ROE Trend

In 2021, the adjusted ROE stood at 187.59%. A significant increase was observed in 2022, reaching 686.37%. This was followed by a decrease to 313.50% in 2023 and a further increase to 340.96% in 2024. Subsequently, the adjusted ROE declined to 127.60% in 2025 and continued to decrease to 84.13% in 2026.

Net Earnings Impact

Adjusted net earnings remained relatively stable between 2021 and 2023, fluctuating between US$16.697 million and US$17.105 million. A decrease was noted in 2024 to US$14.852 million, followed by a further decline to US$13.963 million in 2025. A slight recovery was observed in 2026, with adjusted net earnings reaching US$15.093 million. The decreasing trend in net earnings from 2023 onwards likely contributed to the declining adjusted ROE in later years.

Stockholders’ Equity Impact

Adjusted stockholders’ equity experienced a notable shift from a deficit of US$-1,696 million in 2022 to US$2,465 million in 2023. This equity continued to grow, reaching US$5,326 million in 2024, US$10,943 million in 2025, and US$17,941 million in 2026. The consistent growth in stockholders’ equity, while positive, partially offset the impact of declining net earnings on the adjusted ROE, resulting in a less pronounced decrease than would have been observed otherwise.

The interplay between adjusted net earnings and adjusted stockholders’ equity significantly influenced the adjusted ROE. While equity growth provided a stabilizing effect, the downward trend in earnings ultimately led to a decline in the adjusted ROE from 2024 to 2026.

The adjusted return on assets (ROA) exhibited fluctuations over the observed period. Initially, the adjusted ROA demonstrated growth, followed by a declining trend in later years. A detailed examination of the components and the resulting ratio reveals specific patterns.

Overall Trend

From January 31, 2021, to January 28, 2024, the adjusted ROA increased from 18.55% to 19.49%. However, subsequent years show a consistent decrease, falling to 14.57% by February 2, 2025, and stabilizing slightly at 14.40% by February 1, 2026.

Net Earnings Contribution

Adjusted net earnings generally mirrored the trend of reported net earnings, peaking in 2022 at US$16,919 million before declining to US$13,963 million in 2025 and showing a modest recovery to US$15,093 million in 2026. This fluctuation in net earnings directly influenced the adjusted ROA.

Asset Base Impact

Adjusted total assets increased steadily from US$70,276 million in 2021 to US$104,803 million in 2026. The most significant increase occurred between 2024 and 2025, rising from US$76,217 million to US$95,850 million. This substantial asset growth, coupled with declining adjusted net earnings in the same period, contributed to the observed decrease in adjusted ROA.

ROA Comparison

The adjusted ROA consistently remained above the reported ROA throughout the period. The difference between the two ratios suggests that adjustments made to net earnings and total assets positively impacted the calculated return. The gap between reported and adjusted ROA remained relatively stable, averaging approximately 0.3-1.0 percentage points annually.

The decline in adjusted ROA from 2024 onwards appears to be primarily driven by the faster rate of growth in adjusted total assets compared to adjusted net earnings. While net earnings experienced a decrease, the asset base expanded considerably, resulting in a lower overall return on those assets. The stabilization of the adjusted ROA in 2026 suggests a potential leveling off of asset growth relative to earnings.