ROIC: 45.4% to 25.7%Narrow moat

Home Depot (HD) — moat facet

Home Depot's own return on invested capital fell from 45.4% to 25.7% in six years, half because it bought SRS and half because it earned less.

Home Depot publishes its return on invested capital every year, and the series is the clearest measure of what has changed. It was 28.1 percent in fiscal 20151, 45.4% in fiscal 20192, 44.7% in fiscal 20213, 36.7% in fiscal 20234 and 25.7% in fiscal 20255. For the twelve months to August 2026 it was 24.8%, against 27.2% a year earlier6.

Home Depot-reported ROIC (%)28.1%FY201545.4%FY201944.7%FY202136.7%FY202325.7%FY202524.8%TTM Q2 FY2026Home Depot Forms 10-K and Q2 fiscal 2026 10-Q; NOPAT over average debt plus equity
Returns have almost halved from the peak.

The company explains the fall itself. NOPAT was $15,897 million in fiscal 2025 against $16,484 million in fiscal 2023, while average debt and equity rose from $44,955 million to $61,914 million7; the decline was primarily driven by higher average equity due to the pause in share repurchases and higher average long-term debt largely due to the financing of the SRS acquisition8.

Both halves matter. The denominator rose because Home Depot borrowed to buy SRS and stopped buying back shares. The numerator fell because operating income fell. The first is a choice; the second is the business.

Home Depot's ROIC was always flattered by its own measure. It divides by debt plus book equity, and years of buybacks had shrunk equity, which was negative at 30 January 20229. The computed return on operating capital, the one charted in this app, was 23.2% for fiscal 202510.

The series had a dip before the rise. Reported ROIC was 34.2% in fiscal 2017, 44.8 percent in fiscal 2018 and 40.8% in fiscal 20201112, and 44.6% in fiscal 202213. It has now fallen for three straight years, the longest decline in the series.

Fiscal 2024 sits between the two. Reported ROIC was 31.3% that year, on NOPAT of $16,424 million and average debt and equity of $52,431 million14, the first year SRS was on the books for part of the year. The decline is a staircase, one step for each acquisition.

This is a narrow position; the returns are still well above any plausible cost of capital. The trailing ROIC is what to follow: a fall below 22% would mean the acquired distributors are dragging returns faster than the stores recover.

Moat trajectory: Narrowing

Trailing ROIC 24.8% in August 2026, from 27.2% a year earlier.

The number that tests this moat
Reported
Home Depot-reported ROIC, trailing twelve months
24.8% (to Q2 fiscal 2026) against 27.2% a year earlier

The company's own return measure; below 22% would mean the acquisitions dilute faster than the core recovers.

Source: Home Depot Form 10-Q, Q2 fiscal 2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
The Denominator Is Growing Faster
Home Depot's capital base grew 38% in two years while its after-tax operating profit fell.
References
  1. ReportedIt was 28.1 percent in fiscal 2015, 45.4% in fiscal 2019, 44.7% in fiscal 2021, 36.7% in fiscal 2023 and 25.7% in fiscal 2025.
    The Home Depot Form 10-K for fiscal 2017 - net sales, earnings, dividends and ROIC for fiscal 2015-2017, transactions of 1,500.8 million and average ticket of $58.77 in fiscal 2015, and the 55% dividend payout target. — Fiscal 2017 · publ. March 2018 · source ↗
  2. ReportedIt was 28.1 percent in fiscal 2015, 45.4% in fiscal 2019, 44.7% in fiscal 2021, 36.7% in fiscal 2023 and 25.7% in fiscal 2025.
    The Home Depot Form 10-K for fiscal 2019 - net sales and earnings for fiscal 2017-2019 and ROIC of 45.4%. — Fiscal 2019 · publ. March 2020 · source ↗
  3. ReportedIt was 28.1 percent in fiscal 2015, 45.4% in fiscal 2019, 44.7% in fiscal 2021, 36.7% in fiscal 2023 and 25.7% in fiscal 2025.
    The Home Depot Form 10-K for fiscal 2021 - ROIC of 44.7%, 40.8% and 45.4% and share repurchases of $15,001 million in fiscal 2021. — Fiscal 2021 · publ. March 2022 · source ↗
  4. ReportedIt was 28.1 percent in fiscal 2015, 45.4% in fiscal 2019, 44.7% in fiscal 2021, 36.7% in fiscal 2023 and 25.7% in fiscal 2025.
    The Home Depot Form 10-K for fiscal 2023 - comparable sales, transactions and ticket for fiscal 2021-2023, ROIC of 36.7%, 44.6% and 44.7%, and stockholders' equity including the deficit of January 2022. — Fiscal 2023 · publ. March 2024 · source ↗
  5. ReportedIt was 28.1 percent in fiscal 2015, 45.4% in fiscal 2019, 44.7% in fiscal 2021, 36.7% in fiscal 2023 and 25.7% in fiscal 2025.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1 business and Item 2 properties: stores, Pros, SRS, competition and supply chain. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  6. ReportedFor the twelve months to August 2026 it was 24.8%, against 27.2% a year earlier.
    The Home Depot Form 10-Q for the quarter ended 2 August 2026 - segment results, product lines, online sales, IEEPA tariff refunds, the Mingledorff's acquisition and trailing ROIC of 24.8%. — Q2 fiscal 2026 · publ. 25 August 2026 · source ↗
  7. ReportedNOPAT was $15,897 million in fiscal 2025 against $16,484 million in fiscal 2023, while average debt and equity rose from $44,955 million to $61,914 million; the decline was primarily driven by higher average equity due to the pause in share repurchases and higher average long-term debt largely due to the financing of the SRS acquisition.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - financial statements and notes: earnings, cash flow, balance sheet, debt and acquisitions. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  8. ReportedNOPAT was $15,897 million in fiscal 2025 against $16,484 million in fiscal 2023, while average debt and equity rose from $44,955 million to $61,914 million; the decline was primarily driven by higher average equity due to the pause in share repurchases and higher average long-term debt largely due to the financing of the SRS acquisition.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - financial statements and notes: earnings, cash flow, balance sheet, debt and acquisitions. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  9. ReportedIt divides by debt plus book equity, and years of buybacks had shrunk equity, which was negative at 30 January 2022.
    The Home Depot Form 10-K for fiscal 2023 - comparable sales, transactions and ticket for fiscal 2021-2023, ROIC of 36.7%, 44.6% and 44.7%, and stockholders' equity including the deficit of January 2022. — Fiscal 2023 · publ. March 2024 · source ↗
  10. Moat Explorer calcThe computed return on operating capital, the one charted in this app, was 23.2% for fiscal 2025.
    Moat Explorer calculation, tools_roic_edgar.py method on SEC EDGAR XBRL for CIK 354950, years labelled by the calendar year each fiscal year ends: return on invested capital 25.1% (2015), 28.5% (2016), 32.6% (2017), 37.4% (2018), 47.2% (2019), 43.0% (2020), 39.4% (2021), 43.4% (2022), 40.0% (2023), 32.5% (2024), 28.2% (2025), 23.2% (2026, fiscal 2025). — Fiscal 2014-2025 · publ. September 2026 · source ↗
    Method: NOPAT (operating income x (1 - effective tax rate)) divided by average operating invested capital (total assets less current liabilities less cash), from SEC EDGAR XBRL. Home Depot's own ROIC divides NOPAT by average long-term debt plus equity, which buybacks shrank, so its figures are higher.
  11. ReportedReported ROIC was 34.2% in fiscal 2017, 44.8 percent in fiscal 2018 and 40.8% in fiscal 2020, and 44.6% in fiscal 2022.
    The Home Depot Form 10-K for fiscal 2019 - net sales and earnings for fiscal 2017-2019 and ROIC of 45.4%. — Fiscal 2019 · publ. March 2020 · source ↗
  12. ReportedReported ROIC was 34.2% in fiscal 2017, 44.8 percent in fiscal 2018 and 40.8% in fiscal 2020, and 44.6% in fiscal 2022.
    The Home Depot Form 10-K for fiscal 2021 - ROIC of 44.7%, 40.8% and 45.4% and share repurchases of $15,001 million in fiscal 2021. — Fiscal 2021 · publ. March 2022 · source ↗
  13. ReportedReported ROIC was 34.2% in fiscal 2017, 44.8 percent in fiscal 2018 and 40.8% in fiscal 2020, and 44.6% in fiscal 2022.
    The Home Depot Form 10-K for fiscal 2023 - comparable sales, transactions and ticket for fiscal 2021-2023, ROIC of 36.7%, 44.6% and 44.7%, and stockholders' equity including the deficit of January 2022. — Fiscal 2023 · publ. March 2024 · source ↗
  14. ReportedReported ROIC was 31.3% that year, on NOPAT of $16,424 million and average debt and equity of $52,431 million, the first year SRS was on the books for part of the year.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - financial statements and notes: earnings, cash flow, balance sheet, debt and acquisitions. — Fiscal 2025 · publ. 18 March 2026 · source ↗
Sources
Generated September 26, 2026