Home Depot trades near 20 times this year's earnings with no housing recovery in sight. I expect modest earnings growth and a steady multiple, giving a $308 target, about 8% above the price.
Key points
- $14.51 a share is my fiscal 2026 earnings estimate, the midpoint of guidance, up 2% from $14.23.
- 20 times earnings is what the price pays today, with the CEO on medical leave and no housing recovery.
- $307.71 is my 12-month target, 8% above the $286 price, inside the hold band.
The call
The price requires a slow grind, not a recovery. At $286 the stock costs 19.7 times my fiscal 2026 earnings estimate. That multiple assumes profit growth of a few percent and no housing rebound.
Diluted EPS by fiscal year ($ per share)Source: SEC XBRL filings; FY26E and FY27E are my estimates
I believe that is about right. Earnings fell two years running, from $15.11 to $14.23. Management sees no sign of a housing turnaround. Ticket rose 2.8% while transactions fell 1.0%. The second quarter also got a one-time tariff refund that costs will offset.
Valuation
| Item | Figure |
|---|
| Fiscal 2026 earnings, guidance midpoint | $14.51 a share |
| Growth into fiscal 2027 (acquisitions, Pro, cost control) | 6% |
| Fiscal 2027 earnings estimate | $15.39 a share |
| Multiple applied (price over earnings) | 20 times |
| Target price in 12 months | $307.71 |
I use 20 times because it matches today's multiple and the stock's fall already reflects stalled earnings. Add the 3.3% dividend yield and the total return is near 11%, short of a buy. The downside is a 17 times multiple, about $262, so the risk is roughly balanced against the gain.
Risks
- Housing stays frozen and big projects stay deferred. Watch comparable transactions on November 17, the Q3 report.
- The CEO's leave extends, or the tariff cost offset exceeds the refund. Watch for a leadership announcement and Q3 gross margin below 33%.
- Debt of about $53 billion, with buybacks paused, limits flexibility. Watch commercial paper rates and any delay in resuming repurchases.
What would change my mind
Two quarters of positive transaction growth, or a mortgage rate below 6.5%, would move me to buy; guidance cut below flat earnings would move me to sell.