Home Depot, Inc. (The) (NYSE: HD) and Lowe’s Companies (NYSE:LOW) are both large-cap retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitabiliy, valuation, dividends, earnings, risk, analyst recommendations and institutional ownership.

Profitability

This table compares Home Depot, Inc. (The) and Lowe’s Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Home Depot, Inc. (The) 8.53% 158.80% 18.49%
Lowe’s Companies 4.22% 56.78% 10.14%

Insider and Institutional Ownership

71.5% of Home Depot, Inc. (The) shares are owned by institutional investors. Comparatively, 74.7% of Lowe’s Companies shares are owned by institutional investors. 0.3% of Home Depot, Inc. (The) shares are owned by insiders. Comparatively, 0.1% of Lowe’s Companies shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Home Depot, Inc. (The) and Lowe’s Companies, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Home Depot, Inc. (The) 1 6 17 0 2.67
Lowe’s Companies 1 9 14 0 2.54

Home Depot, Inc. (The) currently has a consensus target price of $164.03, suggesting a potential upside of 7.39%. Lowe’s Companies has a consensus target price of $85.58, suggesting a potential upside of 9.19%. Given Lowe’s Companies’ higher probable upside, analysts clearly believe Lowe’s Companies is more favorable than Home Depot, Inc. (The).

Risk and Volatility

Home Depot, Inc. (The) has a beta of 1.08, suggesting that its share price is 8% more volatile than the S&P 500. Comparatively, Lowe’s Companies has a beta of 1.08, suggesting that its share price is 8% more volatile than the S&P 500.

Earnings and Valuation

This table compares Home Depot, Inc. (The) and Lowe’s Companies’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Home Depot, Inc. (The) $95.72 billion 1.91 $15.69 billion $6.68 22.87
Lowe’s Companies $66.64 billion 0.99 $7.51 billion $3.18 24.64

Home Depot, Inc. (The) has higher revenue and earnings than Lowe’s Companies. Home Depot, Inc. (The) is trading at a lower price-to-earnings ratio than Lowe’s Companies, indicating that it is currently the more affordable of the two stocks.

Dividends

Home Depot, Inc. (The) pays an annual dividend of $3.56 per share and has a dividend yield of 2.3%. Lowe’s Companies pays an annual dividend of $1.64 per share and has a dividend yield of 2.1%. Home Depot, Inc. (The) pays out 53.3% of its earnings in the form of a dividend. Lowe’s Companies pays out 51.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Home Depot, Inc. (The) has raised its dividend for 4 consecutive years and Lowe’s Companies has raised its dividend for 54 consecutive years.

Summary

Home Depot, Inc. (The) beats Lowe’s Companies on 11 of the 16 factors compared between the two stocks.

About Home Depot, Inc. (The)

The Home Depot, Inc. (The Home Depot) is a home improvement retailer. The Company sells an assortment of building materials, home improvement products, and lawn and garden products, and provides various services. The Home Depot stores serves three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. Its DIY customers are home owners purchasing products and completing their own projects and installations. The Company assists these customers with specific product and installation questions both in its stores and through online resources and other media designed to provide product and project knowledge. Its DIFM customers are home owners purchasing materials themselves and hiring third parties to complete the project or installation. Professional Customers are primarily professional renovators/remodelers, general contractors, repairmen, installers, small business owners and tradesmen.

About Lowe’s Companies

Lowe’s Companies, Inc. (Lowe’s) is a home improvement retailer. The Company operates approximately 1,860 home improvement and hardware stores, representing approximately 200 million square feet of retail selling space. The Company operates approximately 1,800 stores located across over 50 states in the United States, including approximately 80 Orchard Supply Hardware (Orchard) stores in California and Oregon, as well as approximately 40 stores in Canada and over 10 stores in Mexico. The Company operates through the home improvement retail operations segment. The Company offers a range of products for maintenance, repair, remodeling and decorating. The Company offers home improvement products in categories, including Lumber and Building Materials; Tools and Hardware; Appliances; Fashion Fixtures; Rough Plumbing and Electrical; Lawn and Garden; Seasonal Living; Paint; Flooring; Millwork; Kitchens; Outdoor Power Equipment, and Home Fashions.

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