Home Depot Is Down 24% From Its High. Here's Why I'd Hold It for a Decade.

Since its inception in the late 1970s, Home Depot has established itself as the pioneer of the big-box home improvement retail category, expanding to over 2,000 stores globally. The company boasts high profit margins and a strong return on capital, indicating its competitive edge. However, the stock has underperformed in recent years, down 11% over the past five years compared to the S&P 500. Despite this, I believe Home Depot is a worthwhile hold for the next decade, and here are the reasons why.

As a duopoly in the home improvement retail sector, Home Depot and Lowe's share unmatched scale, reach, technology, and product range, giving them a dominant market presence. While both companies are similar in many ways, Home Depot has differentiated itself by focusing on the professional contractor segment, which it now sees as its primary growth opportunity. To capitalize on this, Home Depot acquired SRS Distribution, a building materials distribution company, to strengthen its position in the professional segment.

Home Depot's investment in omnichannel capabilities sets it apart from competitors. Customers can now order through the company's app for delivery or in-store pickup, and digital project-planning apps help consumers determine their needs and complete projects. Compared to other retail categories, Home Depot faces minimal risk from disruption, as its heavy and bulky SKUs, such as lumber, make it challenging for companies like Amazon to gain significant market share.

Additionally, Home Depot's stores serve as distribution hubs, facilitating easy pickup of e-commerce orders, a feat that would be difficult for a pure-play e-commerce company to replicate.

The housing market, heavily influenced by the pandemic, has been frozen, resulting in low mortgage rates, high housing prices, and now high mortgage rates, which have deterred potential buyers. However, the housing crisis is a well-known issue, and the country is estimated to be short of around 4 million homes. Eventually, lower interest rates or a political push may lead to a rebound in the housing market, benefiting Home Depot, which is well-positioned to capitalize on this rebound.

With its focus on high volume and high margins, Home Depot has historically delivered strong results to investors, with an operating margin of 12.5% in its most recent earnings report and a return on invested capital of 25.7% in 2025. Overall, Home Depot's combination of share buybacks, dividends, and growth potential makes it an attractive investment for the next decade.