Are You Overpaying For Home Depot Stock Versus Its Rivals?

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Investors pay 22.3 times earnings for Home Depot (HD) stock. That valuation is higher than for its closest rival, Lowe’s, or for Amazon, but lower than for Walmart or Costco. Among these five large retailers, Home Depot retains the highest share of its sales as operating profit, yet it recorded the slowest sales growth over each company’s latest four quarters. So how much extra are you paying for Home Depot’s margin?

Home Depot Costs A Third More Than Lowe’s

As the only other home improvement retailer in the group, Lowe’s trades at 16.7 times earnings. This means a dollar of Home Depot’s profit costs investors about a third more. That premium buys a wider margin: Home Depot recorded a 12.4% operating margin over its latest four quarters, compared with 11.4% at Lowe’s. It does not buy faster growth. Lowe’s increased its sales by 8.2% over its own latest four quarters, while Home Depot saw sales rise 2.5%.

Both home improvement stocks lost ground in the year to October 27, 2026. Home Depot fell 15.3% including dividends and Lowe’s dropped 16.6%, while Amazon, Walmart and Costco all posted gains. Walmart and Costco cost more than Home Depot and grew faster, but both operate as consumer staples retailers with operating margins of 4.4% and 3.9%. Amazon, a broadline retailer, trades at a lower multiple of earnings and grew faster, with a margin only slightly thinner. But its $135 billion of net income ran above its $93.7 billion operating profit, so on operating profit alone it costs more than Home Depot.

Is Home Depot’s Margin Its Thinnest In A Decade?

On a twelve-month basis, it is. Over the four quarters to August 2, 2026, Home Depot reported its lowest operating margin at any quarter end in the past ten years, falling from a high of 15.3%.

The latest quarter benefited from tariff refunds. Home Depot booked $685 million of refunds against the cost of products it had already sold, which management said added about 145 basis points to gross margin. Rising fuel, energy and input costs, alongside a product mix shift toward GMS and Mingledorff’s, two businesses Home Depot bought, took most of that back, management said. Even with that benefit, the quarter’s operating margin was 14.3%, down from 14.5% a year earlier.

Sales in that quarter increased 5.7%, while comparable sales rose 1.7%. Home Depot bought GMS in September 2025, so the year-earlier quarter did not include it. Comparable sales to Pro customers increased and outpaced sales to do-it-yourself shoppers, but management said larger discretionary projects remain under pressure.

Management Repeated Home Depot’s Sales And Margin Forecasts

Reporting its results on August 18, 2026, Home Depot held its fiscal 2026 forecast at the levels set in May. Management expects total sales to grow 2.5% to 4.5%. It expects comparable sales to range from flat to up 2%, and an operating margin of 12.4% to 12.6%.

Management expects rising fuel, energy and other input costs to fully offset the tariff refunds over the year. It also said housing turnover has stayed low for four years, showing no sign yet of a turn.

Given the premium investors pay over Lowe’s, the share price appears to assume Home Depot can keep the group’s widest margin while sales at its own stores grow faster than they do now. Home Depot holds that margin lead so far, but its comparable sales grew slowly in the latest quarter. Comparable sales growth is the figure to check when Home Depot reports again, expected in November 2026.

Does This Mean You Should Act On HD?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.

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