One Number That Makes Home Depot A Buy

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One business stands out at Home Depot (HD): SRS, an acquisition that now sells through Home Depot’s stores and that bulls may be betting on. You probably see Home Depot as a store chain tied to housing. Management says housing turnover has been low for four years, and Home Depot stock lost 16.9% over the past year, while the S&P 500 gained 16.5%. That is the contradiction: a business that may be growing faster than the rest of Home Depot sits inside a stock that has trailed the market. So is SRS really growing faster than the rest of Home Depot?

SRS Is Outgrowing The Rest Of Home Depot

So far, yes. During the quarter that ended August 2, 2026, SRS grew its comparable sales faster than Home Depot as a whole. Overall comparable sales for the company rose 1.7%. SRS was positive in all of its verticals, and management said on the August 18, 2026 call that it looks to be taking significant share.

Management expects SRS to keep growing for the year. It guided the business to mid-single-digit organic sales growth for fiscal 2026. For the whole company, management guided a different measure, comparable sales growth of flat to 2%.

One number shows how far SRS has spread: 90%. That is the share of Home Depot’s stores that closed a sale through SRS within the last 12 months, management said, so SRS no longer sits apart from the stores.

Home Depot’s Margin Has Slipped For Three Years

Home Depot’s profit has not kept up with SRS’s growth so far. Its operating margin was 14.9% over the twelve months that ended July 30, 2023. The figure slipped to 13.9% a year later. Operating margin fell again to 13.1% in the twelve months to August 3, 2025 and to 12.4% in the twelve months to August 2, 2026. That marks the lowest rate at any of the past 40 quarter ends.

The latest quarter’s gross margin looked better, and that is where the worry sits. On the same call, the question came up whether Home Depot would have missed profit forecasts without a tariff refund. Management said the company would have beaten its own expectations regardless. By management’s count, the refund added about 145 basis points to gross margin, yet gross margin rose only about 25 basis points from a year earlier. About 60 basis points of it went to higher fuel, energy and input costs, and about 60 more went to the mix of the GMS and Mingledorff’s acquisitions.

Home Depot does get more sales from those acquisitions. Management expects total sales to grow about 2.5% to 4.5% in fiscal 2026, reflecting the GMS acquisition, new stores, new branches and tuck-in acquisitions. But management also expects the unplanned input costs to fully offset the tariff refunds over the year.

What Would Show SRS Slowing Down?

SRS’s organic sales growth against management’s mid-single-digit guide for fiscal 2026 is the measure that would show a slowdown. Management said it will give a broader view of the year at the end of the third quarter. The 90% counts stores that closed a sale through SRS, not how much they sold. This shows how widely SRS has spread rather than how large it is.

If SRS slows to the pace of the stores, Home Depot is back to waiting on housing, where management saw no sign of an inflection point on the August call. With the refund mostly received by the end of June, Home Depot has to protect its margin against cost pressure that management called significant and unplanned.

So far, SRS is growing faster than Home Depot as a whole, while Home Depot’s operating margin has slipped for three years and its gross margin rose in the latest quarter only on the refund. Operating margin, against management’s 12.4% to 12.6% guide for fiscal 2026, is the number to watch when Home Depot reports 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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