Is The Home Depot, Inc. overvalued or undervalued?

As of 7 July 2025, the valuation grade for The Home Depot, Inc. has moved from very expensive to expensive, indicating a slight improvement in perceived value but still suggesting overvaluation. The company is considered overvalued based on its high P/E ratio of 44, a Price to Book Value of 80.34, and an EV to EBITDA ratio of 27.06, all of which significantly exceed those of its peer Lowe's Companies, Inc., which has a P/E of 22.72 and an EV to EBITDA of 14.98.
In comparison to the broader market, The Home Depot's stock has underperformed against the S&P 500 over multiple periods, with a 1-year return of 8.72% compared to the S&P 500's 17.14%, and a 5-year return of 51.71% versus 96.61% for the index. This trend reinforces the notion that the stock is currently overvalued relative to both its peers and the market.