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Home Depot vs. Lowe's: Which Stock Should Investors Consider?
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There are many legendary pairs of business rivals in the world, with both sides of the aisle persistently aiming to steal market share from one another.
In addition, there’s the battle of the home improvement retailers Home Depot (HD - Free Report) and Lowe’s Companies (LOW - Free Report) . But when it comes to this pairing, which stock would be a better consideration for investors?
Let’s take a closer look.
Valuation
When it comes to valuation, Home Depot shares presently trade at a 22.0X forward earnings multiple (F1), above the five-year median by a few ticks. Conversely, Lowe’s shares trade at a 16.5X forward earnings multiple, beneath the 18.1X five-year median by a far margin.
Image Source: Zacks Investment Research
In addition, HD shares presently trade at a 2.2X forward price-to-sales ratio (F1), precisely in line with the respective five-year median. Looking at LOW, the 1.5X forward price-to-sales is notably cheaper and slightly above the five-year median.
Image Source: Zacks Investment Research
In this round, Lowe’s appears to come out on top, with the company’s shares notably cheaper at present.
Growth Expectations
Both companies are expected to see a growth cooldown within earnings and revenue in their current years, with estimates reflecting a 10% year-over-year earnings decline on 3.5% lower revenues for Home Depot.
Conversely, Lowe’s earnings are forecasted to take a 3% hit paired with a 10% revenue decline. Still, growth resumes for both in their next fiscal years, with Home Depot’s earnings forecasted to recover 7%, whereas Lowe’s is expected to post 9% earnings growth.
The slowdown in growth for the companies’ current fiscal years isn’t all that surprising, likely a reflection of the deceleration in home improvement activities post-pandemic.
Dividends
Both are dividend-paying stocks, reflecting their shareholder-friendly nature. Dividends can boost any portfolio, helping limit drawbacks in other positions and providing a passive income stream.
Currently, HD shares yield 2.5% annually, whereas LOW shares yield 2%. Further, Home Depot sports a 15% five-year annualized dividend growth rate, with LOW carrying an even more impressive 21% five-year annualized dividend growth rate.
So, while HD shares currently yield a greater percentage annually, LOW has grown its payout faster over the last five years.
Image Source: Zacks Investment Research
Bottom Line
After taking a closer look at a few aspects of each, LOW shares are cheaper, and the company has grown its dividend payout more relative to HD, giving it a slight edge in this battle. Both stocks are currently a Zacks Rank #3 (Hold).
In addition, it’s worth noting that Home Depot is scheduled to reveal quarterly results next week on August 15th, before the market’s open.
Analysts have kept their expectations stable for the quarter to be reported, with the $4.46 Zacks Consensus EPS Estimate unchanged over the last 60 days. The value reflects a 12% pullback in earnings from the year-ago quarter.
Home Depot is forecasted to bring in $42.2 billion per the Zacks Consensus Estimate, reflecting a modest pullback of 3.5% from the year-ago quarter. The quarterly estimate has been taken a fractional 0.4% lower since mid-May.
Further, HD posted somewhat mixed results in its latest release, exceeding earnings expectations but marginally falling short of the consensus revenue estimate.
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Home Depot vs. Lowe's: Which Stock Should Investors Consider?
There are many legendary pairs of business rivals in the world, with both sides of the aisle persistently aiming to steal market share from one another.
A few of these legendary rivals include Exxon Mobil (XOM - Free Report) vs. Chevron (CVX - Free Report) , PepsiCo (PEP - Free Report) vs. The Coca-Cola Company (KO - Free Report) , United Parcel Service (UPS - Free Report) vs. FedEx (FDX - Free Report) .
In addition, there’s the battle of the home improvement retailers Home Depot (HD - Free Report) and Lowe’s Companies (LOW - Free Report) . But when it comes to this pairing, which stock would be a better consideration for investors?
Let’s take a closer look.
Valuation
When it comes to valuation, Home Depot shares presently trade at a 22.0X forward earnings multiple (F1), above the five-year median by a few ticks. Conversely, Lowe’s shares trade at a 16.5X forward earnings multiple, beneath the 18.1X five-year median by a far margin.
Image Source: Zacks Investment Research
In addition, HD shares presently trade at a 2.2X forward price-to-sales ratio (F1), precisely in line with the respective five-year median. Looking at LOW, the 1.5X forward price-to-sales is notably cheaper and slightly above the five-year median.
Image Source: Zacks Investment Research
In this round, Lowe’s appears to come out on top, with the company’s shares notably cheaper at present.
Growth Expectations
Both companies are expected to see a growth cooldown within earnings and revenue in their current years, with estimates reflecting a 10% year-over-year earnings decline on 3.5% lower revenues for Home Depot.
Conversely, Lowe’s earnings are forecasted to take a 3% hit paired with a 10% revenue decline. Still, growth resumes for both in their next fiscal years, with Home Depot’s earnings forecasted to recover 7%, whereas Lowe’s is expected to post 9% earnings growth.
The slowdown in growth for the companies’ current fiscal years isn’t all that surprising, likely a reflection of the deceleration in home improvement activities post-pandemic.
Dividends
Both are dividend-paying stocks, reflecting their shareholder-friendly nature. Dividends can boost any portfolio, helping limit drawbacks in other positions and providing a passive income stream.
Currently, HD shares yield 2.5% annually, whereas LOW shares yield 2%. Further, Home Depot sports a 15% five-year annualized dividend growth rate, with LOW carrying an even more impressive 21% five-year annualized dividend growth rate.
So, while HD shares currently yield a greater percentage annually, LOW has grown its payout faster over the last five years.
Image Source: Zacks Investment Research
Bottom Line
After taking a closer look at a few aspects of each, LOW shares are cheaper, and the company has grown its dividend payout more relative to HD, giving it a slight edge in this battle. Both stocks are currently a Zacks Rank #3 (Hold).
In addition, it’s worth noting that Home Depot is scheduled to reveal quarterly results next week on August 15th, before the market’s open.
Analysts have kept their expectations stable for the quarter to be reported, with the $4.46 Zacks Consensus EPS Estimate unchanged over the last 60 days. The value reflects a 12% pullback in earnings from the year-ago quarter.
Home Depot is forecasted to bring in $42.2 billion per the Zacks Consensus Estimate, reflecting a modest pullback of 3.5% from the year-ago quarter. The quarterly estimate has been taken a fractional 0.4% lower since mid-May.
Further, HD posted somewhat mixed results in its latest release, exceeding earnings expectations but marginally falling short of the consensus revenue estimate.