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SampleStudentAudioEnhancedPPTX.pptxA Comparative Analysis of Home Depot & Lowe's
By:
NYSE: LOW
NYSE: HD
Background
Home Depot is the world's largest home improvement retailer.
Lowe's Companies, Inc. And subsidiaries are the world's second largest home improvement retailer.
Both stores retail include: home improvement, building, hardware, do-it-yourself (DIY), do it for me (DIFM), and décor products
Home Depot is 23rd & Lowe's is 40th on the Fortune 500
Financial Statements
Tenebruso, J. (2018). Better buy: the Home Depot, Inc. vs. Lowe’s. Retrieved April 16, 2019 from, https://www.fool.com/investing/2018/10/17/better-buy-the-home-depot-inc-vs-lowes.aspx
Home Depot revenue is nearly 50% larger than Lowe's.
Home Depot has a higher operating margin 14.5% compared to 8.9%.
Home Depot generated more than twice as much cash from operations and free cash flow.
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Growth
Tenebruso, J. (2018). Better buy: the Home Depot, Inc. vs. Lowe’s. Retrieved April 16, 2019 from, https://www.fool.com/investing/2018/10/17/better-buy-the-home-depot-inc-vs-lowes.aspx
Lowe's revenue growth has slightly outpaced Home Depot but, Home Depot has provided higher profit growth.
Lowe's grow from cost reduction initiatives and Home Depot e-commerce.
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Valuation
Tenebruso, J. (2018). Better buy: the Home Depot, Inc. vs. Lowe’s. Retrieved April 16, 2019 from, https://www.fool.com/investing/2018/10/17/better-buy-the-home-depot-inc-vs-lowes.aspx
P/FCF - Price to free cash flow
P/E - Price to Earnings
PEG – Price to earnings to growth
Home depot stock is more expensive.
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Horizontal Analysis
Home Depot stronger balance sheet
Cash flow more Robust
And higher dividends
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Vertical Analysis
Home depot higher net earnings,
bigger sales,
larger operating income
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Financial Ratios
Market Performance Ratios
EPS
Home Depot 6.25 Lowes 4.15
Profitability Ratios
Gross Profit Margin
Home Depot 0.34 Lowes 0.34
Asset Utilization/ Turnover Ratios
Inventory Turnover
Home Depot 5.57 Lowes 3.97
EPS – Home Depot is a better value than Lowes
Gross – Profit Margin is equal. They both have about the same amount left over from sales once cost of goods sold is taken into account.
Inventory – Home Depot is able to turn it's inventory over more times than Lowes.
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Financial Ratios cont.
Liquidity Ratios
Current Ratio
Home Depot 1.03 Lowe’s 1.20
Debt Ratios
Cash Coverage
Home Depot 17.86 Lowe’s 12.69
Current Ratio – Lowe's is however surpassing Home Depot in meeting it's financial obligations. This is due to Lowe's carrying lower debt than Home Depot
Cash Coverage – Home Depot is more liquid than Lowe's due to the availablity of more revenue and retained earnings
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Conclusion
Neither company is a bad investment.
Lowe's stock has room to grow.
Home Depot is more robust and thus the better investment now.
Home Depot is paying higher dividends.
Home Depot has more cash available.
Home Depot has more operating capital.
Lowe's is up and coming but, not on the same level as Home Depot.
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