Home Depot Inc. (NYSE:HD)

The solvency position, as indicated by the provided ratios, exhibits considerable fluctuation over the analyzed period, spanning from May 2021 to February 2026. Generally, a decreasing trend in leverage ratios is observed towards the end of the period, though significant peaks are present. The company demonstrates a generally healthy ability to cover its interest obligations, though this metric also shows a declining trend.

Debt to Equity

The debt to equity ratio demonstrates substantial volatility. It begins at 20.52, decreases to 17.48, then rises sharply to 37.82 before experiencing a significant peak at 173.11. Following this peak, the ratio generally declines, reaching 4.62 in August 2025 and stabilizing around 4.35 in February 2026. This suggests a period of increased reliance on debt financing followed by a deliberate or reactive reduction in leverage.

Debt to Equity (Including Operating Lease Liability)

This ratio mirrors the trend of the standard debt to equity ratio, but at consistently higher levels. The inclusion of operating lease liabilities significantly increases the reported debt. A similar peak is observed at 199.91, followed by a downward trend culminating in a value of 5.10 in February 2026. The consistent difference between this ratio and the standard debt to equity ratio highlights the material impact of operating leases on the company’s overall financial leverage.

Debt to Capital

The debt to capital ratio remains relatively stable throughout the period, fluctuating between 0.95 and 0.99. A slight downward trend is noticeable in the later periods, decreasing from 0.98 to 0.81. This indicates a consistent proportion of debt financing relative to total capital, with a minor shift towards equity or retained earnings in the most recent observations.

Debt to Capital (Including Operating Lease Liability)

Similar to the debt to equity ratios, including operating lease liabilities results in higher values. The ratio exhibits a similar pattern to the standard debt to capital ratio, with a slight decline towards the end of the period, moving from 0.98 to 0.84. This reinforces the impact of operating leases on the overall capital structure.

Debt to Assets

The debt to assets ratio shows a gradual increase from 0.49 to 0.66, followed by a slight decline to 0.53 in February 2026. This suggests an initial increase in the proportion of assets financed by debt, followed by a stabilization and minor reduction. The ratio remains relatively consistent in the later periods.

Debt to Assets (Including Operating Lease Liability)

This ratio consistently exceeds the standard debt to assets ratio, reflecting the impact of operating lease liabilities. The trend is similar, with an increase followed by a stabilization around 0.62. The consistent difference underscores the significance of operating leases in the company’s asset financing.

Financial Leverage

Financial leverage exhibits the most dramatic fluctuations. A peak of 319.94 is observed, followed by a substantial decline to 8.20 by February 2026. This suggests a period of aggressive financial leverage followed by a significant deleveraging effort. The high initial values indicate a substantial multiplier effect of debt on returns, while the later decline suggests reduced risk and reliance on debt.

Interest Coverage

The interest coverage ratio demonstrates a consistent, though moderate, downward trend. Starting at 15.29, it declines to 8.71 by February 2026. While the ratio remains above 8, indicating a comfortable ability to cover interest expenses, the declining trend warrants monitoring. This suggests a potential weakening in the company’s ability to service its debt obligations from operating income, potentially due to increased debt levels or decreased profitability.

The debt-to-equity ratio exhibits significant fluctuations over the observed period. Initially, the ratio is high, indicating a substantial reliance on debt financing relative to equity. A period of volatility follows, with notable increases and decreases, before stabilizing at lower levels towards the end of the analyzed timeframe.

Initial Period (May 2, 2021 – Oct 31, 2021)

The debt-to-equity ratio begins at 20.52 and decreases to 17.48 before sharply increasing to 37.82. This suggests an initial reduction in leverage followed by a considerable increase in debt relative to equity within this timeframe. The increase in the ratio during this period warrants further investigation into the reasons for increased borrowing or a decrease in equity.

Volatility and Extreme Values (Jan 30, 2022 – Jul 31, 2022)

The period from January 30, 2022, to July 31, 2022, is characterized by extreme volatility. The ratio reaches a peak of 173.11, indicating a very high level of debt compared to equity. This is followed by a substantial decrease, suggesting a significant shift in the company’s capital structure, potentially through equity increases or debt reduction. The absence of values for February 2022 and May 2022 further complicates the interpretation of this period.

Stabilization and Decline (Oct 30, 2022 – Feb 1, 2026)

From October 30, 2022, the debt-to-equity ratio demonstrates a general downward trend, albeit with some fluctuations. The ratio decreases from 33.10 to 4.35 by February 1, 2026. This indicates a strengthening of the company’s financial position, with a decreasing reliance on debt financing. The ratio stabilizes in the range of 4.35 to 4.62 during the final reporting periods, suggesting a more consistent capital structure.

The substantial changes in the debt-to-equity ratio throughout the period suggest active management of the company’s capital structure. The initial high ratio, followed by periods of volatility and eventual stabilization at lower levels, indicates a potential shift in financial strategy. The significant increase in equity observed in later periods appears to be a key driver of the declining ratio.

The debt-to-equity ratio, including operating lease liability, exhibits significant fluctuations over the observed period. Initially, the ratio decreased from 23.99 in May 2021 to 20.47 in August 2021, before increasing substantially to 43.73 in October 2021. A period of unavailable values follows, then a dramatic spike to 199.91 is observed in July 2022. Subsequently, the ratio declines to 38.30 in October 2022 and continues to decrease, reaching 32.24 in January 2023.

A notable increase occurs in April 2023, with the ratio rising to 136.54, followed by a decrease to 37.07 in July 2023 and 34.44 in October 2023. The ratio then increases again to 50.04 in January 2024 before declining steadily through February 2026, reaching a low of 5.10. This represents a substantial improvement in the company’s solvency position over this timeframe.

Initial Period (May 2021 – October 2021)

The debt-to-equity ratio initially demonstrates volatility, with a decrease followed by a significant increase. This suggests potential changes in the company’s capital structure or debt levels during this period.

Dramatic Increase (July 2022)

The exceptionally high ratio of 199.91 in July 2022 warrants further investigation. This could be attributed to a substantial increase in debt, a significant decrease in stockholders’ equity, or a combination of both. The negative stockholders’ equity reported in prior periods likely contributed to this outcome.

Subsequent Decline (October 2022 – February 2026)

Following the peak in July 2022, the ratio generally trends downward, indicating an improvement in the company’s financial leverage. This decline coincides with a recovery and subsequent growth in stockholders’ equity, alongside relatively stable or decreasing debt levels. The ratio’s movement below 10 in May 2025 suggests a strengthening financial position.

Stockholders’ Equity Impact

The fluctuations in stockholders’ equity appear to have a significant impact on the debt-to-equity ratio. The negative equity values observed in early 2022 amplify the ratio, while the subsequent recovery and growth in equity contribute to its decline. The ratio is highly sensitive to changes in the equity component.

Debt Levels

Total debt, including operating lease liability, generally increased until October 2022, then stabilized and decreased slightly before a substantial increase in July 2024. While debt levels contribute to the ratio, the more pronounced driver of change appears to be the fluctuations in stockholders’ equity.

The debt to capital ratio for the analyzed period demonstrates a generally decreasing trend, although with some fluctuation. Initially, the ratio remained stable before exhibiting a period of increase, followed by a more pronounced decline towards the end of the observed timeframe.

Initial Stability (May 2, 2021 – Oct 31, 2021)

The debt to capital ratio began at 0.95 and increased slightly to 0.97 over the first five periods. This indicates a relatively consistent relationship between the company’s debt and its capital structure during this time. Total debt increased from US$35,861 million to US$39,148 million, while total capital increased from US$37,609 million to US$40,183 million.

Increase and Plateau (Jan 30, 2022 – Oct 30, 2022)

A noticeable increase in the ratio occurred between January 30, 2022, and January 29, 2023, peaking at 1.04. This suggests an increased reliance on debt financing relative to capital. However, the ratio then plateaued around 0.97-0.99 for three consecutive periods. Total debt increased to US$43,193 million, while total capital fluctuated, reaching US$44,755 million.

Downward Trend (Jan 29, 2023 – Nov 2, 2025)

From January 29, 2023, the debt to capital ratio exhibited a consistent downward trend, decreasing from 0.98 to 0.82. This indicates a strengthening of the capital structure relative to debt. Total debt increased to US$56,014 million, but total capital increased at a faster rate, reaching US$68,130 million.

Recent Stability (Feb 1, 2026 – May 4, 2025)

The most recent periods show a stabilization of the ratio around 0.81-0.83. This suggests that the company has maintained a consistent capital structure in the short term. Total debt remained relatively stable at US$55,772 million to US$52,317 million, while total capital increased from US$68,585 million to US$62,982 million.

Overall, the observed trend suggests a shift towards a more conservatively financed capital structure over the analyzed period. While debt levels have increased in absolute terms, the growth in capital has outpaced debt accumulation, resulting in a lower debt to capital ratio.

The debt to capital ratio, inclusive of operating lease liabilities, demonstrates a generally stable pattern over the analyzed period, with a noticeable downward trend in the latter half of the observation window. Initially, the ratio fluctuates around the 0.96 to 1.04 range between May 2021 and January 2022. A slight increase is observed in early 2022, peaking at 1.04, before stabilizing around 0.97 to 1.00 through October 2022. From January 2023 onward, a consistent, albeit gradual, decline is evident, reaching 0.84 by February 2026.

Initial Period (May 2021 – October 2022)

During this timeframe, the debt to capital ratio remained relatively consistent, oscillating between 0.95 and 0.98, with a temporary increase to 1.04 in January 2022. This suggests a stable capital structure with debt levels generally in line with equity and lease obligations. The slight increase in early 2022 could be attributed to increased borrowing or changes in lease liabilities.

Stabilization Phase (January 2023 – October 2023)

From January 2023 through October 2023, the ratio exhibited minimal fluctuation, remaining within the 0.97 to 0.99 range. This indicates a period of capital structure stability, with no significant shifts in the balance between debt and capital.

Downward Trend (January 2024 – February 2026)

A clear downward trend emerges starting in January 2024. The ratio decreased from 0.98 to 0.84 by February 2026. This decline suggests a reduction in the proportion of debt financing relative to total capital, potentially through debt repayment, equity issuance, or retained earnings accumulation. The rate of decline appears consistent throughout this period.

Magnitude of Change

The overall change in the debt to capital ratio over the entire period is approximately 12 percentage points, decreasing from 0.96 in May 2021 to 0.84 in February 2026. While not a dramatic shift, this represents a meaningful improvement in the company’s solvency position, indicating reduced financial risk.

The observed trend suggests a strengthening financial position with a decreasing reliance on debt financing. Continued monitoring of this ratio is recommended to assess the sustainability of this trend and its impact on long-term financial health.

The debt-to-assets ratio for the analyzed period demonstrates a generally increasing trend, with some fluctuations. Initially, the ratio rose from 0.49 in May 2021 to 0.57 in January 2023, indicating a growing reliance on debt financing relative to the company’s asset base. Following this peak, the ratio experienced a slight decrease to 0.54 in April 2023, before increasing again to reach 0.58 in January 2024. The most recent periods show a slight decline, ending at 0.53 in February 2026.

Initial Increase (May 2021 – January 2023)

From May 2021 through January 2023, the debt-to-assets ratio increased by 0.08, from 0.49 to 0.57. This suggests the company increased its debt levels at a faster rate than its assets during this period. The increase from 0.54 in October 2021 to 0.56 in January 2022 was relatively modest, but the subsequent rise to 0.57 in January 2023 represents a more pronounced shift.

Fluctuation and Recent Trend (January 2023 – February 2026)

After reaching 0.57 in January 2023, the ratio exhibited some volatility. A decrease to 0.55 was observed in April 2023, followed by a rise to 0.58 in January 2024. The ratio then decreased to 0.56 in July 2024 and remained relatively stable through October 2024. The final period shows a slight decrease to 0.53 in February 2026, indicating a potential stabilization or modest reduction in leverage.

Peak Leverage

The highest ratio observed during the analyzed period was 0.58, occurring in both January 2024 and July 2023. This indicates the company’s highest level of debt financing relative to its assets during the timeframe. The subsequent fluctuations suggest efforts to manage or adjust the capital structure.

Overall Trend

While fluctuations exist, the overall trend suggests a moderate increase in financial leverage over the analyzed period. The ratio moved from 0.49 to 0.53, indicating a greater proportion of assets are financed by debt. The recent stabilization suggests a potential shift in strategy towards maintaining a more consistent debt-to-asset level.

The debt-to-assets ratio, including operating lease liabilities, exhibits a generally increasing trend over the observed period, with some fluctuations. Initially, the ratio rose from 0.58 in May 2021 to 0.66 in August 2022. Subsequently, it experienced a slight decline before increasing again to 0.68 in January 2024. The most recent periods show a stabilization, fluctuating between 0.61 and 0.65, ending at 0.62 in February 2026.

Initial Increase (May 2021 – August 2022)

From May 2021 through August 2022, the ratio increased by 8 percentage points, from 0.58 to 0.66. This indicates a growing reliance on debt financing relative to the company’s asset base during this period. The increase suggests either increased borrowing or a slower growth rate in assets compared to debt.

Subsequent Fluctuations (August 2022 – January 2024)

Following the peak of 0.66, the ratio decreased slightly to 0.65 by October 2022, then remained relatively stable through April 2023. A subsequent increase to 0.68 in January 2024 suggests a renewed increase in leverage. This period demonstrates a less consistent pattern than the initial increase, potentially reflecting specific financing or investment decisions.

Recent Stabilization (January 2024 – February 2026)

The ratio has largely stabilized in the most recent periods, fluctuating between 0.61 and 0.65. This suggests a more controlled approach to debt management. The final value of 0.62 in February 2026 indicates that the debt-to-asset ratio has remained within a narrow range, suggesting a consistent financial structure.

The overall trend indicates an increased reliance on debt financing, particularly in the earlier part of the observed period. While the ratio has stabilized more recently, it remains elevated compared to its initial value in May 2021. The fluctuations throughout the period suggest that the company’s capital structure is subject to change based on business needs and financial conditions.

The financial leverage ratio exhibits significant fluctuations over the observed period. Initially, the ratio decreased from 41.51 in May 2021 to 34.20 in August 2021, before increasing substantially to 70.56 in October 2021. A period of unavailable values follows, after which a dramatic spike to 319.94 is recorded in July 2022. Subsequently, the ratio declines, reaching 52.85 by October 2022 and continuing to decrease to 43.53 in April 2023.

From May 2023 through February 2026, a consistent downward trend is evident. The ratio falls from 43.53 to 8.20, indicating a substantial reduction in financial leverage. The most recent values, from May 2025 to February 2026, show a stabilization within the 8.20 to 12.81 range, suggesting a potential leveling off of this trend.

Initial Period (May 2021 - October 2021)

The initial period demonstrates volatility in financial leverage. The increase to 70.56 in October 2021 suggests a significant increase in debt relative to equity during that quarter.

Peak and Subsequent Decline (July 2022 - April 2023)

The exceptionally high ratio of 319.94 in July 2022 is a notable outlier. The subsequent decline through April 2023 indicates a concerted effort to reduce reliance on debt financing or a substantial increase in equity.

Consistent Downward Trend (May 2023 - February 2026)

The period from May 2023 to February 2026 is characterized by a steady decrease in financial leverage. This suggests a strengthening of the company’s financial position through debt reduction or equity growth. The recent stabilization indicates this trend may be moderating.

Total Assets and Equity Relationship

The fluctuations in financial leverage are correlated with changes in both total assets and, more significantly, stockholders’ equity. The large negative value for stockholders’ equity in January 2022 likely contributed to the peak in financial leverage observed in July 2022. The subsequent growth in stockholders’ equity is consistent with the observed decline in the leverage ratio.

Overall, the observed pattern indicates a shift from a highly leveraged financial structure to a more conservative one, particularly evident in the latter portion of the analyzed period. The company appears to be actively managing its debt levels and/or increasing its equity base.

The interest coverage ratio for the analyzed period demonstrates a consistent, albeit decelerating, decline. Initially, the ratio exhibited strong performance, but a clear downward trend emerged over the observed timeframe.

Overall Trend

The interest coverage ratio began at 15.29 and generally decreased to 8.71 by the end of the period. While remaining above 8.70 throughout, the rate of decline accelerated in the later quarters.

Initial Period (May 2, 2021 – Feb 1, 2026)

From May 2021 to February 2026, the ratio fluctuated but generally remained strong, peaking at 17.14 in January 2022. This indicates a robust ability to meet interest obligations with earnings during this phase. However, even within this period, a subtle downward drift is noticeable.

Accelerated Decline (Feb 1, 2026 – May 4, 2025)

The period from February 2026 to May 2025 shows a more pronounced decrease in the ratio. The ratio moved from 8.87 to 8.85, 8.81, and 8.71, indicating a weakening capacity to cover interest expenses with earnings. This suggests a potential increase in financial risk.

EBIT and Interest Expense Relationship

A review of the underlying components reveals that while Earnings Before Interest and Tax (EBIT) generally remained substantial, the increase in interest expense outpaced the changes in EBIT. This disparity contributed significantly to the observed decline in the interest coverage ratio. Interest expense increased from US$339 million to US$594 million over the period, while EBIT experienced more moderate fluctuations.

The observed trend warrants continued monitoring. While the company currently maintains a comfortable interest coverage level, the declining ratio suggests a potential need to manage debt levels or improve profitability to maintain financial flexibility.