Even with the S&P 500 in the green so far this year, the market's double-digit drop in 2022 has laid the groundwork for investors to find solid buying opportunities. Great businesses, such as Home Depot (HD 1.25%), are selling at sizable discounts, giving investors a good opportunity. Home Depot's stock is still down some 30% from its $406 all-time high in December 2021.

Does this mean now is the right time to buy this top retail stock? Here's what investors need to know. 

Facing some headwinds 

Home Depot's operations received a boost during the coronavirus pandemic. Consumers, flush with extra cash, turned to renovation projects. As a result, this home-improvement giant saw double-digit percentage annual revenue increases in fiscal 2020 and 2021.

Home Depot hadn't seen double-digit growth since fiscal 2004, something shareholders cheered. From the start of calendar 2020 through the end of 2021, the stock climbed 90%, compared to the 52% total return of the S&P 500. At the time, it was great to be an owner of Home Depot's stock. 

The most recent fiscal year painted a gloomier picture, however. Difficult comparisons from the prior year, as well as the noticeable shift in consumer spending away from physical goods toward services and travel, are having a negative impact on the company.

Home Depot's fiscal 2022 revenue of $157.4 billion was just a 4.1% gain over the previous year. Same-store sales showed an increase of 3.1%. Both of these metrics were worse if you look at the most recent fiscal quarter, signaling that things have been trending downward throughout the course of last year. 

Net income also increased 4.1% in fiscal 2022. But thanks to ongoing share repurchases, Home Depot's diluted earnings per share rose 7.5%. It's definitely great to see the bottom line increase at a faster rate than the top line, especially as many businesses grapple with inflationary pressures right now. 

Management doesn't expect things to get much better in the current fiscal year. They forecast same-store sales and diluted EPS to be flat in fiscal 2023 compared to 2022.  

Focus on the big picture 

The latest headwinds that Home Depot is dealing with are entirely outside the company's control, and this should hopefully ease investor concerns. Looking back over the past three years, who could've predicted a global pandemic, supply chain issues, rampant inflation, and now mortgage rates that haven't been this high since before the Great Recession?

No one could have known that these events were going to happen. The best thing any business can do is try and successfully navigate whatever is thrown its way to position itself for success going forward. 

Based on fiscal 2022 revenue, which is a gargantuan sum by any measure, the company still currently commands just 17.5% of a $900 billion total addressable market, according to the management team. As the clear leader in its industry (Home Depot's fiscal 2022 sales were $60 billion, more than what rival Lowe's posted), this business is in a prime spot to continue growing revenue and profits in the decade ahead once the economic situation improves.

With this market opportunity in mind, it's easy to see that Home Depot is in a strong competitive position. The company operates 2,322 total stores, with 2,007 in the U.S., providing adequate access and convenience for customers to get the products and advice that they need to get projects done. 

What's more, because Home Depot has been a successful enterprise dating back over four decades, there is little risk of disruption happening in its industry. Naysayers might point to the emergence of e-commerce as a threat, but because Home Depot generally sells big and bulky products, it is protected.

In fact, in the most recent fiscal quarter, 45% of online orders were picked up at a Home Depot location. It's evident that the company has developed an omnichannel shopping experience that is gaining traction. 

The durability of Home Depot is, no doubt, a favorable characteristic that points to more success once macro conditions improve. This is a profitable business that generates lots of free cash flow. And investors can buy shares today at a compelling price-to-earnings ratio of under 18, which is below the trailing-10-year average valuation.