Down 30%, Is Now the Time to Buy Home Depot Stock?

For the sixth straight quarter, Home Depot (NYSE: HD) squeezed out positive U.S. same-store sales when it reported its fiscal first-quarter results on May 19. That follows a period in which the company saw its U.S. same-store sales decline for eight consecutive quarters. In a bit of irony, the stock held up very well during this tough sales stretch, but more recently, the share price is down nearly 30% from its highs despite turning the corner on the sales front.

Let's take a closer look at the home improvement retailer's fiscal Q1 report and prospects to see if now is a good time to buy the stock.

Same-store sales continue to edge higher

Home Depot saw its global comparable-store sales edge up 0.6% higher in fiscal Q1, marking its fourth straight quarter of positive growth. Meanwhile, U.S. same-store sales growth increased by 0.4%. While it hasn't seen robust growth over the past year, it's been a steady improvement compared to the prior two years, as seen in the table below.

Data source: Home Depot earnings reports. Home Depot's fiscal quarters end approximately one month after standard calendar quarters. Table by author.

The same-store sales growth in Q1 was led by a 2.2% increase in average ticket size, while transactions declined by 1.3%. Big-ticket items, which the company defines as those costing $1,000 or more, rose 0.8%, while pro sales outperformed do-it-yourself buyers. Overall, nine of Home Depot's 16 product categories recorded positive same-store sales growth.

Home Depot's total revenue increased by 4.8% year over year to $41.77 billion, while adjusted earnings per share (EPS) fell 4% to $3.43. These results topped the analyst consensus, which called for EPS of $3.41 on $41.52 billion in sales, according to data compiled by LSEG.

Looking ahead, Home Depot maintained its full-year guidance for revenue to increase from 2.5% to 4.5%. It is looking for same-store sales to be flat to up 2% for the year.

Image source: The Motley Fool.

Can the stock rally?

Home Depot has been facing industry headwinds for quite some time. A pull-forward in demand from the pandemic, coupled with higher interest rates and less housing turnover, has created a tough environment. However, the home improvement retailer is posting solid results and maintaining its guidance amid a strapped consumer facing high gas prices, which suggests the industry is stabilizing.

With the sell-off in its stock over the past year, Home Depot now trades at a forward price-to-earnings (P/E) ratio of about 20.5 times fiscal 2026 analyst estimates, its most attractive valuation in years. With same-store sales still positive and the stock trading at a compelling valuation, I think investors can start to accumulate shares in this blue chip.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.