Home Depot (HD) Could Be 19% Undervalued As Delivery And Smart Home Efforts Gain Ground

Home Depot (HD) just added a new smart home angle to its home improvement story. A fresh partnership with TP-Link brings exclusive Tapo security camera bundles into 500 stores and onto its website.

Despite a steady stream of product and technology initiatives, Home Depot’s recent share price performance has been weak, with the stock down 11.5% on a 1 month share price return and 10.2% on a year to date share price return, while the 1 year total shareholder return has declined 22.7%. This points to fading momentum even as management pushes new digital, delivery and smart home efforts.

Scan how Home Depot’s tech-heavy push compares with other retailers by filtering for 17 high quality undiscovered gems that are quietly building out similar digital and smart home capabilities.

Home Depot now pairs a weaker share price with fresh sales momentum and high-profile smart home and delivery pushes. At around US$310 a share, does that mix still skew the risk reward toward buyers, or not from here?

Most Popular Narrative: 19.4% Undervalued

The current Home Depot share price of about $310 sits well below a narrative fair value of $385 that some investors use as their anchor. According to andrei9868, that gap rests on a view of Home Depot as more than a retailer, with growth potential tied to its Pro ecosystem and distribution acquisitions rather than short term store traffic alone.

Home Depot is evolving from a traditional big-box home improvement retailer into a comprehensive supplier ecosystem for professional contractors (“Pros”), while continuing to serve DIY customers through stores, digital tools, and faster fulfillment. Recent acquisitions (including SRS Distribution and GMS) expand its reach into specialty distribution for roofing, drywall, HVAC, and other complex project categories, enlarging the addressable market toward roughly $1.2 trillion and the Pro segment opportunity near $700 billion.

Read the complete narrative.

Want to see why this narrative backs a higher fair value for Home Depot than today’s share price suggests? The key ingredients are Pro focused revenue mix, expected earnings growth from integration, and a profitability profile that assumes the distribution deals eventually settle into a steadier margin range. Curious which assumptions matter most for that $385 figure and how sensitive the story is to housing trends and project volumes? The full narrative lays out the numbers behind that view in detail.

Result: Fair Value of $385 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

Still, the Home Depot story can break if housing activity stays weak and big ticket projects remain on hold, or if acquisitions add more cost than profit.

Find out about the key risks to this Home Depot narrative.

Another View: Home Depot Through A Cash Flow Lens

The narrative fair value of $385 paints Home Depot as undervalued, yet the SWS DCF model points in the opposite direction. On that cash flow view, HD at about $310 trades above an estimated value of $273.49, which screens as overvalued. Which story should carry more weight for you?

For investors who want to see how that cash flow work is built up line by line, it helps to review the full calculation and the key levers that move it most, such as earnings forecasts and discount rates. Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Home Depot for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed messages around Home Depot can make the story feel cloudy, so move quickly, check the numbers yourself and weigh both sides of the argument. To see both the potential upside and the concerns in one place, start with the 3 key rewards and 2 important warning signs.

Looking for more Home Depot sized ideas?

If you only stick with Home Depot, you could miss other opportunities quietly taking shape. Use the Simply Wall St screener to spot fresh ideas before the crowd.

• Target resilient income by reviewing companies described as 6 dividend fortresses that could help anchor a portfolio when price swings feel uncomfortable.
• Hunt for quality at a discount through the 49 high quality undervalued stocks and see which businesses combine solid fundamentals with prices that trail their underlying metrics.
• Stack your watchlist with sturdier balance sheets by filtering through the list of solid balance sheet and fundamentals (24 results) so you do not overlook financially stronger alternatives.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com