Is The Home Depot, Inc. overvalued or undervalued?

As of 20 May 2025, The Home Depot, Inc. has moved from a valuation grade of very expensive to expensive. The company is currently considered overvalued based on its high P/E ratio of 44, significantly above the industry average. Additionally, the Price to Book Value stands at 80.34, and the EV to EBITDA ratio is 27.06, both indicating a premium valuation compared to its peers.
In comparison, Lowe's Companies, Inc. has a P/E ratio of 17.75 and Builders FirstSource, Inc. shows a P/E of 13.04, highlighting the disparity in valuation within the industry. Despite a strong ROE of 184.02% and a high dividend yield of 106.97%, these metrics do not sufficiently justify the elevated valuation levels. Recent stock performance shows The Home Depot lagging behind the S&P 500 with a year-to-date return of -8.23%, further reinforcing the notion of overvaluation.