The fall was not a miss
This is the fact the comparison turns on, and it is the opposite of what most coverage assumed.
Across the twelve months in which Home Depot ($HD) lost about 29% of its market value, it reaffirmed its fiscal 2026 guidance twice, on 19 May and again on 18 August 2026, with every line item unchanged: total sales up 2.5% to 4.5%, comparable sales flat to up 2.0%, diluted EPS flat to up 4.0%, operating margin 12.4% to 12.6%. Management called the first quarter "in line with our expectations" and the second "exceeded our expectations."
Trailing earnings were roughly flat. So the multiple did all the work, falling from roughly 28 times earnings to roughly 20 on a denominator that barely moved. The market did not mark down the business. It withdrew an assumption.
The assumption was housing, and housing went the other way
| A year ago | Now | |
|---|---|---|
| 30-year fixed mortgage | 6.30% (25 Sep 2025) | 7.03% (24 Sep 2026) |
| Existing home sales | above 4m | 3.98m, down 1.2% year on year |
Home improvement demand follows housing turnover, and turnover follows rates. Both moved against the multiple.
Inside the company the same thing shows up in the mix of the comp. Home Depot has now gone six straight quarters without a comparable sales figure above 2%: −0.3%, +1.0%, +0.2%, +0.4%, +0.6%, +1.7%. And last quarter's growth was not people. Comparable average ticket rose 2.8% while comparable customer transactions fell 1.0%. Price is carrying the comp, not footfall.
What about $23bn of acquisitions?
Home Depot bought SRS Distribution in June 2024 for about $18.0bn and GMS in September 2025 for about $5.1bn. Sales rose every year. Almost nothing else did.
| Fiscal year ended | 28 Jan 2024 | 2 Feb 2025 | 1 Feb 2026 |
|---|---|---|---|
| Net sales ($m) | 152,669 | 159,514 | 164,683 |
| Operating income ($m) | 21,689 | 21,526 | 20,890 |
| Operating margin | 14.21% | 13.49% | 12.68% |
| Free cash flow ($m) | 17,946 | 16,325 | 12,646 |
Operating income is lower than before the spending started, and free cash flow is down about 29%.
That matters most for the dividend, which is the main reason people own this stock. The yield is about 3.24%, but the last raise was 1.3% against 15.2% in 2022, the payout now absorbs about 72% of free cash flow, and the buyback has been switched off since January, with unchanged treasury stock confirming zero repurchases for six-plus quarters. A 3.24% yield growing 1.3% and consuming 72% of free cash is a payout being defended, not grown.
Is Walmart's 38x earned?
Largely, and it survives the accounting check.
In its latest quarter Walmart ($WMT) grew advertising about 38%, membership fee revenue about 17% and eCommerce about 23%, all several times the pace of the company's 5.9% revenue growth, and adjusted operating profit grew almost three times faster than sales. It raised full-year guidance in August rather than trimming it.
One honest caveat. In fiscal 2026 Walmart's GAAP operating income grew only 1.6% against revenue up 4.7%, so profit did not outgrow revenue last year. The acceleration is recent: two quarters plus guidance, not a multi-year record. Anyone arguing the premium is unproven has that fact on their side.
We also checked whether investment gains were flattering the multiple. Walmart booked a $2.1bn gain in fiscal 2026 against a $794m loss the year before, so its GAAP EPS was flattered. On a trailing basis the marks net to roughly a $938m loss, and adjusting moves the multiple from about 38x to about 37x. Stripping the noise does not rescue the valuation in either direction. The premium is real.
The counterweight that cuts the other way
Neither company discloses a return on invested capital figure, so we calculated it from filed inputs. On our numbers Home Depot earns roughly 23% on invested capital against Walmart's roughly 16%.
The cheaper stock is the higher-returning business. That is the strongest argument against everything above, and it is why this page does not tell you which one to own.
Has this gap happened before?
Three times since 2000 the ratio between the two multiples reached 1.8x or wider: late 2002, late 2018 into early 2019, and late 2021 into early 2023. Each time it closed within about fifteen months. Not once did it close because the expensive one fell. Either Walmart grew into its multiple or Home Depot rallied.
Two caveats, because this is the weakest evidence on the page. Two of those three episodes were artifacts of Walmart's own GAAP charges rather than genuine re-ratings, which leaves a clean comparable sample of one. And leadership between these two has swapped four times since 1990, so today's ranking is not a regime. Three instances is not a rule.
What would change the answer
Home Depot reports its third quarter on Tuesday 17 November 2026, which is the first test of the guidance it reaffirmed twice. Walmart is expected to report around 19 November. The number to watch at Home Depot is not the comp, it is whether transactions stop falling, because a comp built on ticket alone is a price effect rather than a demand recovery.
