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Home Depot (HD): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 FY27, to Aug 2, 2026, filed Aug 25, 2026; rules v1.1
Home Depot (HD): 0 rules of 10 triggered on the filings to Aug 2, 2026. 1 to review; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
A precise DCF value = the true value To review · confidence high
The DCF's point value is 219.96 a share (price 349.94); 75% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 153.89 to 286.03; across every method the research ran the range is 108 to 1,123. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence high
Free cash flow did not rise ($16.3B → $12.6B): the trap does not arise.
The figures and how they are read
| Fiscal year before | FY25 |
| Fiscal year | FY26 |
| Operating cash flow, year before | $19.8B |
| Operating cash flow | $16.3B |
| Capex, year before | $3.5B |
| Capex | $3.7B |
| Free cash flow, year before | $16.3B |
| Free cash flow | $12.6B |
| Change in FCF | −$3.7B |
| Change in capex | $194M |
| Working capital: change in its cash contribution | −$3.7B |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY26 (cash flow statement, fiscal year) · FY25 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 0.3% of revenue: small enough that adding it back changes little.
The figures and how they are read
| Fiscal year | FY26 |
| Stock compensation | $522M |
| Revenue | $164.7B |
| SBC / revenue | +0.3% |
| Buybacks | 0 |
| Buybacks / SBC | 0.0 |
| Diluted shares, year before | 993.0M shares |
| Diluted shares | 995.0M shares |
| Diluted shares: change | +0.2% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY26 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 18% against revenue 6% in Q2 FY27; DSO 13 against a median of 13: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q2 FY27 |
| Revenue, year over year | +5.7% |
| Receivables, year over year | +18.5% |
| Quarter before | Q1 FY27 |
| Revenue y/y, quarter before | +4.8% |
| Receivables y/y, quarter before | +12.5% |
| Days sales outstanding | 12.9 |
| DSO, median of eight quarters | 13.2 |
| Receivables | $7.0B |
| Revenue | $47.9B |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q2 FY27 (receivables and revenue) · Q2 FY26 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Not triggered confidence low
Adjusted and GAAP EPS were within 10% of each other in the last 3 quarters.
The figures and how they are read
| Quarter / adjusted EPS / GAAP EPS / gap | 2025-10-31 / 3.74 / 3.62 / 0.032; 2026-04-30 / 3.43 / 3.3 / 0.038; 2026-07-31 / 4.92 / 4.79 / 0.026 |
| Quarters with adjusted ≥ 10% above GAAP | 0 |
| Quarters compared | 3 |
| Latest gap | +2.6% |
the analysts' 'actual' (usually the company's adjusted EPS) against GAAP net income ÷ diluted shares for the matching quarter; a gap of 10% or more counts (the stand-in until three releases' reconciliation tables are on file)
Source: 2025-10-31 (adjusted 3.74 vs GAAP 3.62) · 2026-04-30 (adjusted 3.43 vs GAAP 3.30) · 2026-07-31 (adjusted 4.92 vs GAAP 4.79)
C02 Low net debt = no refinancing risk Not triggered confidence medium
$4.7B comes due within a year, 3.7× covered by cash and investments of $2.1B plus $15.1B of free cash flow.
The figures and how they are read
| Cash and investments | $2.1B |
| Debt | $53.6B |
| Net debt | $51.6B |
| Due within a year | $4.7B |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $15.1B |
| Cash plus free cash flow | $17.2B |
| Coverage of what is due | 3.7 |
| Due in the second year | $3.6B |
| Balance sheet date | 2026-08-02 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY26 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 5% and net income rose 5% in Q2 FY27; the share count rose 0.2%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q2 FY27 |
| Quarter before | Q2 FY26 |
| EPS, year before | $4.58 |
| EPS | $4.79 |
| Net income, year before | $4.6B |
| Net income | $4.8B |
| Diluted shares, year before | 994.0M shares |
| Diluted shares | 996.0M shares |
| EPS growth | +4.5% |
| Net income growth | +4.7% |
| Diluted shares: change | +0.2% |
| eps from profit | $0.22 |
| eps from share count | -$0.01 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q2 FY27 (net income, diluted shares, EPS) · Q2 FY26 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $14.2B is not at a cyclical high against the last eight years (median $14.8B, best $17.1B): the P/E of 24.5× is on a normal year.
The figures and how they are read
| market value | $348.5B |
| net income ttm | $14.2B |
| pe ttm | 24.50 |
| net income median fy | $14.8B |
| pe mid cycle | 23.50 |
| net income peak fy | $17.1B |
| years | FY19 / 11121.0; FY20 / 11242.0; FY21 / 12866.0; FY22 / 16433.0; FY23 / 17105.0; FY24 / 15143.0; FY25 / 14806.0; FY26 / 14156.0 |
| down years in window | 3 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q2 FY27 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 219.96 a share (price 349.94); 75% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 153.89 to 286.03; across every method the research ran the range is 108 to 1,123. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 219.96 |
| price | 349.94 |
| terminal value share | +75.4% |
| swing by input | Operating margin / ±3 pts / 153.89 / 286.03; Revenue growth (each year) / ±5 pts / 168.91 / 281.33; WACC / ±1 pt / 178.88 / 279.22; Tax rate / ±5 pts / 201.93 / 237.99 |
| range all methods | 108.19; 1123.47 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Home Depot: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.