How Risky Is Home Depot Stock?
Home Depot (HD) stock has fallen 12.6% in a month, with no company news to explain it, while the S&P 500 slipped 0.3%. The loss came while the market was flat, so a market fall could further worsen the situation. Holders who stay are counting on the stock to recover as it did after past shocks. Holders are also counting on a business as profitable as it was then. So how risky is Home Depot stock if the market turns down?
Home Depot Keeps Less Of Each Sales Dollar
Home Depot is a less profitable business than it was three years ago. Operating margin, the share of sales left as profit after operating costs, was 14.9% three years ago. It is 12.4% over the last twelve months. The margin fell each year in between.
Home Depot’s sales and debt are not the problem. Revenue was $169.2 billion over the last twelve months, up from $165.1 billion a year earlier. Debt is 22.3% of the company’s market value, close to the 21% for the S&P 500.
Home Depot is exposed to housing. Management said on the August 18, 2026 earnings call that housing turnover has been at historical lows for four years. Housing turnover is the pace at which homes change hands. Management also said larger discretionary projects remain under pressure.
Management forecasts an operating margin of 12.4% to 12.6% for fiscal 2026. Meeting that forecast would hold the margin at or just above the 12.4% of the last twelve months. That level is a five-year low. Home Depot was more profitable in the market shocks of the past five years than it is today.
Has Home Depot Dropped More Than The Market Before?
Home Depot stock has dropped slightly more than the market, on average. The company has traded through fifteen market shocks since 2007, as tracked by Trefis. Home Depot’s average fall in those shocks was 16.9%, against 15.8% for the S&P 500.
The deepest of the fifteen came in the pandemic shock of 2020. Home Depot fell 37% from peak to low, against 34% for the index.
The stock fell in fourteen of the fifteen shocks and regained its pre-shock high every time. The median recovery was 2.9 months from the low. Half were slower. Two of the fourteen recoveries took more than a year, so a repeat can cost time as well as money.
What Would You Lose In Another 37% Drop?
A repeat of the 2020 fall would cost 3.7% of your portfolio if Home Depot is a tenth of it. That loss is from Home Depot alone, with everything else held flat.
One of the two slow recoveries came after the interest-rate shock of 2022. Home Depot fell 34% in that shock, against 24% for the S&P 500. The stock then needed 17.8 months from its low to regain its pre-shock high.
Home Depot’s average fall in shocks is close to the market’s, but its operating margin has shrunk for three years. The fiscal 2026 operating margin is due with Home Depot’s full-year results. A margin below 12.4% would mean Home Depot is still getting less profitable. Home Depot’s recent recoveries would then be a weaker guide, because they came from a more profitable company.
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.