Home Depot vs Lowes - Final

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Northern Kentucky University *

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610

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Finance

Date

Feb 20, 2024

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docx

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4

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Home Depot vs. Lowes Andrea Rothfuss Both Home Depot and Lowes fall within the home improvement sector of the retail industry. In 2021, we were in the midst of COVID. At this point in time, the market for home improvement had grown significantly due to people having more money, reduced access to contractors and more time on their hands as a result of lockdown and stimulus payments. According to NerdWallet, “From the 2019 census survey to the 2021 survey, total projects grew 17% and spending grew 20%.” Company Comparison o Home Depot Number of Stores: US : 2006 Canada: 182 Mexico: 129 Total: 2317 Number of Countries with Home Depot Stores : 3 Number of Associates: 490,600 o Lowes Number of Stores: US: 1737 Canada: 234 Total: 1971 Number of Countries with Lowes Store : 2
Number of Associates: 340,000 Ratio Analysis Home Depot Lowes Current Ratio 1.01 1.02 Debt to Equity Ratio -21.58 -4.95 Price to Earning Ratio 22.89 19.32 Earnings Per Share Ratio 15.53 12.04 Return on Equity Ratio 4,929.39% -549.43 Profit Margin 10.87% 8.74% Things to note as a potential shareholder: Over the course of 2021, the total sales growth for Lowes was 7.4%, compared to Home Depot with a total sales growth of 14.4%. Dividend Yield: Home Depot : 2.95% Lowes: 2.22% Inventory Turnover: Home Depot: 5.6x Lowes: 4.1x
Based on the finances of both companies we can see that Home Depot has taken on a lot more debt which could deem it a bit risky, but it has a higher profit margin. This in itself leads me to believe that Home Depot as an organization can better service the debt they are taking on. Meanwhile, the price to earnings indicates that Lowes is a better value holding for a potential shareholder, although based on all the overall picture I would say it’s fair to assume that Lowes would be the riskier option. With all that being said - looking at the sales growth from 2021 in addition to the ratio analysis, as a potential shareholder I would look to put my money into Home Depot. Although it is more expensive and it takes on more debt, their overall sales growth along with higher inventory turnover and a higher dividend yield, I would feel more confident investing my money into Home Depot as the safer option. References About the author: Elizabeth Renter's work as a senior writer and data analyst at NerdWallet has been cited by The New York Times. (n.d.). 2022 home improvement report. NerdWallet. Retrieved March 26, 2023, from https://www.nerdwallet.com/article/mortgages/2022-home- improvement#:~:text=Total%20home%20improvement%20spending&text=From%20the %202019%20census%20survey,during%20the%202021%20survey%20period. Home Depot - 42 year stock price history: HD. Macrotrends. (n.d.). Retrieved March 26, 2023, from https://www.macrotrends.net/stocks/charts/HD/home-depot/stock-price-history
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The Home Depot. (n.d.). Retrieved March 27, 2023, from https://ir.homedepot.com/~/media/Files/H/HomeDepot-IR/2022/2021_AnnualReport_IR_Site_FI NAL.pdf Home | Lowe’s corporate. (n.d.). Retrieved March 27, 2023, from https://corporate.lowes.com/sites/lowes-corp/files/2022-04/Lowe-2021-Annual-Report.pdf Lowe's - 38 year stock price history: Low. Macrotrends. (n.d.). Retrieved March 26, 2023, from https://www.macrotrends.net/stocks/charts/LOW/lowes/stock-price-history