Home Depot, a blue chip home improvement retailer with more than 2,000 stores worldwide, has high profit margins and a high return on capital, but its shares are down 11% over the past five years, well behind the S&P 500 amid a weak housing market. The author still believes the stock is worth holding for the next decade, citing four reasons: its position as one of two dominant players alongside Lowe's, a focus on professional contractors including the SRS Distribution acquisition, a leadership position that faces little disruption from Amazon because many products are bulky, and an expected housing rebound given an estimated shortage of around 4 million homes. The company forecast a 12.5% operating margin, versus a historical level closer to 15%, and had a 25.7% return on invested capital in 2025.
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Home Depot shares have fallen 22% over the past twelve months, while the S&P 500 returned 17.0%, even though total sales rose 5.7% in the fiscal second quarter. On the August 18, 2026 earnings call, executives blamed a frozen housing market, with housing turnover at historical lows for four years, which is holding back demand for larger projects. Comp sales rose 1.7%, but customers made fewer trips: the average ticket climbed 2.8% while comp transactions fell 1.0%. Operating margin over the past twelve months was 12.4%, down from 14.9% three years ago, and the stock sits about 24% below its 52-week high. The article calls the housing pressure a slow-moving risk to monitor rather than an immediate emergency, with the third-quarter report as the next key test.
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Home Depot trades at 22.3 times earnings, above Lowe's at 16.7 times and Amazon but below Walmart and Costco. Over its latest four quarters, Home Depot's 12.4% operating margin beats Lowe's 11.4%, yet its sales grew 2.5% versus Lowe's 8.2%. Its twelve-month operating margin is the lowest in ten years, as a $685 million tariff refund in the latest quarter was largely offset by rising fuel, energy and input costs and a product mix shift. Management held its fiscal 2026 forecast of 2.5% to 4.5% sales growth and a 12.4% to 12.6% operating margin. The article says the share price appears to assume Home Depot keeps its margin lead while sales at its own stores grow faster, and it flags comparable sales growth as the figure to check when the company reports again in November 2026.
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