I've invested in Lowe's because I see it as a good alternative to Home Depot, which carries too high a premium in the share price for my taste. What do all of you other fools think? What's a better investment, Lowe's or Home Depot?
<<I've invested in Lowe's because I see it as a good alternative to Home Depot, which carries too high a premium in the share price for my taste. What do all of you other fools think? What's a better investment, Lowe's or Home Depot?>>Hi Bob!I compared Home Depot and Lowes using Foolish snapshots of the two companies (available on the Motley Fool home page). I'm not an investor in either company, but your question made me curious about the differences between them, and why the Steet thinks so much more of HD than Lowes.HD is by far the largest of the two, with revenues more than double that of Lowes. While this may indicate that Lowes has much more room for growth than HD, there's nothing to suggest that HD can't grow from a 800 pound gorilla into a 1000 pound gorilla.HD has both a current and historically higher profit margin than does Lowes. This fact undoubtedly helps to account for the higher P/E ratio the Street has granted HD over Lowes. Should Lowes improve their profit margin accordingly, they might be rewarded in the same fashion. Lowes is trading at 16 times FY 99 estimates, while HD is trading at 23 times FY 99 estimates. Again, a more equal profit margin would likely bring these ratios closer in tandem. HD is expected to grow earnings 43% over current trailing earnings by FY 99. Lowes' analysts are looking for just 33% growth over the same time period.HD has $100 million more in cash than does Lowes. However, HD also has $500 million more in long term debt.Perhaps more important than anything, the biggest difference I can see in the two companies is that Lowes is concentrated in the Southeast (although it is planning a major expantion into the Midwest), while HD has stores nationwide as well as a significant presence in Canada.A bet on Lowes is a bet on the Southeastern economy. That could be good, or it could be bad, depending on economic conditions in the Southeast vs. the rest of the Nation. That's a bit too microeconomic for my tastes, but worth remember during times of a slowing and/or rapidly changing economy.That's the way I see things from where I sit. You'll have to decide for yourself which you think is the better investment. From a purely numbers standpoint, I like HD. But there may be something to the Lowes story that I'm missing. --Barry :)
Without a major entry using stats because I have to get back to work, so forgive me for not backing up this post with too many facts. Lowe's is not the best of breed in this industry YET. They are still lagging behind their older brother Home Depot for many reasons. However, Lowe's is now targeting the Millenial generation in all facets of advertising to bring in this newest home-owning generation. Restructing Lowe's was the first thing mentioned in the latest conference call and let me tell you, a 2 hour and 30 minute conference call...one of the longest I have ever listed too. Lowe's will trail Home Depot for a couple years still, however, look for the market share to slowly start being ate away from a new look Lowe's. 2020 might be the year that Lowe's declares the Nations largest home improvement retail store. NEVER STOP IMPROVING!