Home Depot takes share in repairs and Pro while big projects wait. At $286 the pullback offers 14.7% upside to our $328 target plus a 3.3% yield.
Key points
- 1.7% comparable sales growth in Q2 FY27, meaning stores open over a year, came from higher tickets as small repairs beat weak big remodels.
- $685 million tariff refund in Q2 FY27 lifted gross margin, meaning sales left after product costs, but will fund higher fuel and input costs this year.
- 3.3% dividend yield at $286.00 in October 2026 pays holders while housing turnover sits near record lows.
The call
Investors have given up on a housing rebound. At $286.00 today the stock pays for only $13.95 a share of next-year profit. That is 20.5 times next-year earnings, a discount for a scale retailer.
Quarterly revenue and operating margin ($ billions, margin %)- Revenue
- My revenue forecast
- Operating margin
- My margin forecast
Source: SEC XBRL company facts through Q2 FY27 ended Aug 2, 2026; Q3-Q4 FY27E are author's estimates.
We see slow growth returning instead. We expect $177.3 billion of next-year sales on Pro demand, meaning contractor sales, and faster delivery. That supports $15.98 a share of next-year profit at a 13.1% operating margin, meaning sales left after running costs.
Valuation
| Driver | Estimate |
|---|
| Sales in fiscal 2028 | $177.3 billion |
| Adjusted operating margin in fiscal 2028 | 13.1% |
| Adjusted profit in fiscal 2028 | $15.98 a share |
| Multiple on fiscal 2028 profit | 20.5 times |
| 12-month target to October 2027 | $328.00 a share |
What the target pays for FY27 profit ($ a share)Source: author's arithmetic on FY27 adjusted EPS of $15.98 a share; as of Oct 8, 2026.
Large sellers often trade near 20.0 times next-year profit. We pay 20.5 times for scale plus a 3.3% yearly payout. Upside of 14.7% to October 2027 supports a buy rating.
Risks
- Housing stays frozen through fiscal 2028 and ticket gains fade, which you would see in negative traffic and flat comparable sales in Q3 FY27.
- Input and tariff costs outlast the refund in fiscal 2027, which you would see in gross margin below 33.0% in Q3 FY27.
- Debt near $50.8 billion in August 2026 limits buybacks, which you would see in flat share count and higher interest in fiscal 2028.
What would change my mind
A drop in Pro comparable sales or online growth below double digits in Q3 FY27 would show share gains have stalled.