Home Depot earned a 110% return on equity in the year that ended in February 2026.
Take that at face value and it is one of the great businesses in history. Put a dollar in, get a dollar and ten cents back, every year. Warren Buffett has spent sixty years compounding at around 20% and is considered the best there has ever been at it. Home Depot is an excellent business. It is not five times better than Buffett.
The number is not a typo. It is a correctly computed answer to a question that stopped being useful some time ago.
Return on equity is profit divided by shareholders' equity, and the trouble is entirely in the bottom half. Equity is not the money invested in the business. It is what is left after you subtract everything the company owes from everything it owns. Buy back stock and that leftover shrinks. Nothing about the stores, the staff or the earnings has moved; the ratio rises because the bottom of the fraction got smaller.
At its February 2026 year end Home Depot carried $60.9 billion of debt against $12.8 billion of equity. A year earlier equity was $6.6 billion and the same sum gave 223%. Earnings barely moved between the two years. The business did not become half as good. The denominator doubled.
The useful habit: when a return figure looks like a miracle, look at what it is divided by. Return on invested capital divides by everything the business actually uses, debt included, and cannot be flattered by a buyback.
The full argument, with the working:
https://returnolio.com/blog/roic-vs-roe
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