In the last decades Home Depot (HD -0.02%) has grown into one of the world’s largest retailers while generating life-changing investment returns for shareholders. Home Depot stock turned a one-time $100 investment in its IPO into more than $3.6 million today.

The company’s secret? It is a well-run company in a growing housing market. Home Depot has diversified its financial resources over the years, which, combined with consistent sales growth, attracts long-term investors very wealthy. The million-dollar question is whether Home Depot can still do the same for the people who buy the stock today.

To find out, I crunched some numbers and sketched out the answer.

A premier retailer in a huge market

Today, Home Depot is the world’s largest home improvement retailer, with approximately 2,300 stores across North America. The company generates annual sales of over $154 billion. Its enormous size and reach represent a competitive advantage, allowing the company to source, sell and deliver products more cheaply than its smaller competitors. Additionally, Home Depot’s large footprint means that most consumers live within a reasonable distance of a store.

But that wasn’t always the case. Even Home Depot started small and its rise to dominance was no accident. The company has been well managed for decades, as evidenced by a strong return on invested capital (ROIC) that tends to increase over time:

HD return on invested capital data (10-year median) from YCharts

What does that mean? Home Depot’s business is efficient; It earns a significant return for every dollar it invests in the company. This can compound over time, and Home Depot’s sales growth only reinforces this effect.

The result is rising cash profits, which Home Depot uses to pay an increasing dividend and buy back shares, further boosting earnings growth and investment returns. Home Depot’s share count has declined 24% over the past decade, and its earnings per share have increased 211%.

That’s the magic formula.

Will it continue?

It’s fair to wonder whether Home Depot can continue its success as the company grows larger. Today, Home Depot has a market cap of nearly $420 billion.

The company still has growth opportunities. There is currently a housing shortage in the United States, which amounts to approximately 4.5 million homes and is increasing. Home Depot sells to professionals (builders and contractors) and do-it-yourselfers, so the company is active in new construction and renovation spending.

The company also acquired SRS Distribution, a specialty retailer in the residential market, for $18.25 billion earlier this year, opening Home Depot to new verticals such as professional roofing, landscaping and pool construction.

Home Depot estimates its total addressable market at $1 trillion, which leaves plenty of room for expansion given its annual sales of $154 billion. This is a promising long-term forecast, but investors should note that Home Depot is a cyclical company due to the ups and downs of the housing market and consumer spending.

Buy Home Depot today? Here’s what to expect

Although Home Depot still has growth ahead of it, it’s probably unrealistic to expect the same returns that the stock has brought investors over the past few decades. Home Depot is a mature company, as evidenced by the fact that the company is focused on expanding and moving into new niches. Analysts expect Home Depot to grow its earnings by an average of 9% to 10% per year over the next three to five years. Adding in the stock’s dividend yield of 2.1%, investors could see an annual total return of 11% to 13%.

Low double-digit returns can add up very well, but it will take time. Home Depot is no longer a short-term investment.

Unfortunately, Home Depot’s valuation may reduce these returns somewhat. The stock trades at a forward P/E ratio of 28, which is high for a company that is expected to struggle to deliver double-digit earnings growth. I don’t think Home Depot, with a PEG ratio of 2.8, is so expensive that investors should sell the stock or avoid it altogether.

Still, Home Depot is a mature blue-chip stock that’s probably seen its best years of growth. The company’s high-quality fundamentals make it an excellent choice for any diversified, long-term portfolio. But is today’s Home Depot purchase set for life? Probably not.