Should You Buy Home Depot Stock Near Its Lowest Price-To-Sales In Ten Years?

Home Depot (HD) shares trade near $300, down about 26% over the past year, while the S&P 500 returned about 17%. Housing turnover has sat at historic lows for four years, and investors doubt the quality of Home Depot’s reported profit. One number argues the other way. The stock trades at 1.8 times trailing sales, against a ten-year range of 1.7 to 2.9.

Image by Steve Buissinne from Pixabay

Is Home Depot’s Profit Really Flattered By A Tariff Refund?

In the second quarter of fiscal 2026, tariff refunds cut Home Depot’s cost of goods sold by $685 million. Take that away and the reported profit looks thinner. Management’s answer is that part of it went straight back out. The refunds were worth about 145 basis points of gross margin, about 60 of which went to offset higher costs, leaving a net benefit of about 85 basis points.

Management blames unplanned pressure from fuel, energy and other product input costs, and says Home Depot would still have beaten its own expectations for the quarter without the refunds. That fight is about one line of the income statement. The multiple sits on another.

Sales were $47.9 billion in the second quarter of fiscal 2026, up 5.7% year over year, helped by the GMS acquisition. Growth has run 4.8% and then 5.7% in the last two quarters, after a 3.8% decline the quarter before that. Revenue over the last twelve months grew 2.5%, down from a trailing-four-quarter pace of 8.5% a year earlier.

What Is Home Depot Actually Selling More Of?

Breadth, mostly. Thirteen of Home Depot’s 16 merchandising departments comped positive in the second quarter of fiscal 2026, and portable power tools set a quarterly sales record. Online comparable sales rose 11% year over year, the fifth quarter in a row of double-digit growth.

Management ties that to speed. Home Depot has now rolled out Express Delivery nationwide, offering tens of thousands of products in three hours or less. SRS, the specialty distributor Home Depot bought to reach professional contractors, comped above the company average in the second quarter, and management says it looks to be taking significant share.

Comparable sales growth came from bigger baskets rather than more visits. Comparable average ticket rose 2.8% while comparable transactions fell 1%. That is the softest part of the case, but fewer shoppers walking in is not a future risk. It is already happening, so the growth rests on each shopper spending more.

Can Home Depot Keep Outrunning Its Costs?

The valuation does not answer that. Nearly all the refunds have now been received, and management calls the unplanned, market-wide cost pressure significant. Home Depot still expects gross margin to be roughly flat against the prior year in the fourth quarter of fiscal 2026, and it has reaffirmed its fiscal 2026 guidance for comparable sales of flat to 2% growth.

A multiple near the bottom of Home Depot’s own ten-year range suggests the price gives little credit for a revenue line that is growing again. Housing is the risk everyone already knows about. The one the price may not carry is a gross margin that keeps leaking once the refunds are gone. Management expects the fourth quarter back to roughly flat and says the refund money covers costs through the third quarter, so the fourth quarter is the test. Among marked-down names, our dip-buying screen ranks how far they fall and shows which ones come back.

So Do You Buy Home Depot For The Discount?

Perhaps, and only if you can wait out a housing cycle nobody can date. If you would rather not make that call stock by stock, look at the Trefis High Quality Portfolio. That portfolio has a track record of outpacing the three major indices.