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Lowe's vs. The Home Depot: Which Deserves Investor Attention?

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When thinking of home improvement, Lowe’s (LOW - Free Report) and The Home Depot, Inc. (HD - Free Report) undoubtedly come to the forefront of many minds.

Both are titans in the home improvement realm and reside within the Zacks Building Products – Retail Industry, which is currently ranked in the top 21% of all Zacks Industries.

Studies have shown that 50% of a stock's price movement can be attributed to the group it’s in, making it crucial to ensure that investors target stocks in a thriving industry.

In fact, the top 50% of Zacks Ranked Industries outperform the bottom 50% by a factor of more than two to one.

With both titans residing in the same highly-ranked industry, it raises a valid question – which company looks better positioned?  

Let’s dive deeper into each one to get a clearer picture.

Share Performance

Over the last five years, LOW shares have outpaced HD shares by a notable margin, up more than 180% compared to HD’s 106% climb.

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Image Source: Zacks Investment Research

The story remains the same when shrinking the timeframe to encompass just 2022; LOW shares have been much more defensive, down roughly 17% vs. HD’s 22% decline.

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Image Source: Zacks Investment Research

The key takeaway is that Lowe’s shares have been stronger in a longer-term timeframe and throughout all of 2022 so far, indicating that market participants have favored LOW shares.

Valuation

Taking a look at valuation multiples, LOW’s 15.3X forward earnings multiple is undoubtedly cheaper than HD’s 18.8X.

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Image Source: Zacks Investment Research

Still, both companies’ forward earnings multiples sit below their respective five-year medians, telling us that shares are cheap on a relative basis.

Both companies sport a Style Score of a B for Value.

Dividends

Who doesn’t love getting paid?

Fortunately for those who seek income, both companies reward their shareholders; HD’s current annual dividend yield sits at 2.4%, a few ticks above LOW’s 2%.

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Image Source: Zacks Investment Research

While HD’s annual dividend yield currently may be higher, LOW’s 18.2% five-year annualized dividend growth rate edges out HD’s 16.8%.

Growth Outlook

For obvious reasons, one of the most critical aspects that sets companies apart is projected growth. If a company isn’t growing, why would an investor buy shares?

For LOW’s current fiscal year, the company’s bottom-line is forecasted to climb 14% Y/Y on top of 1.1% revenue growth.

And in FY24, earnings are forecasted to grow an additional 4.5%, with an estimated Y/Y revenue decline of 1.7%.

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Image Source: Zacks Investment Research

Pivoting to HD, estimates for its current fiscal year indicate a Y/Y earnings improvement of 7% on top of revenue growth of 4%.

For FY24, estimates allude to 2.7% bottom-line growth with a forecasted revenue uptick of 1.4%.

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Image Source: Zacks Investment Research

Lowe’s carries a much stronger bottom-line outlook but a weaker revenue outlook than Home Depot.

Bottom Line

Choosing between these two home improvement heavyweights is difficult, as they’ve established themselves as serious players in the market.

Still, one’s got to come out on top, and it appears that Lowe’s (LOW - Free Report) edges out The Home Depot, Inc. (HD - Free Report) .

Here’s why – LOW shares have been stronger across several timeframes, shares are cheaper, the company’s dividend growth is more robust, and its bottom-line outlook is stronger.

Of course, it’s worth noting that both stocks currently carry a Zacks Rank #3 (Hold).

Tecnoglass, Inc. (TGLS - Free Report) , a Zacks Rank #1 (Strong Buy), could be of interest to those seeking a top-ranked stock in the same Zacks Industry.

The company’s earnings outlook has turned notably bright over the last several months.

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Image Source: Zacks Investment Research

In addition, Tecnoglass’ earnings are forecasted to climb more than 70% in its current fiscal year. The company also pays out an annual dividend, currently yielding 1%.


In-Depth Zacks Research for the Tickers Above


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Lowe's Companies, Inc. (LOW) - free report >>

The Home Depot, Inc. (HD) - free report >>

Tecnoglass Inc. (TGLS) - free report >>

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