Which Retail Stock Is a Better Buy: Lowe’s (LOW) or Home Depot (HD)?


LThe owe companies LOW and Home Depot HD have become two very well known and widely respected names for DIYers working in the retail sector.

The two companies offer very similar services and products, potentially clouding investors’ ability to tell the two apart. Using financial analysis and earnings data, we will make an informed decision on who is showing stronger signs.

Let’s take a zoomed-in look at HD’s and LOW’s recent performance and key financials to determine which stock would be a better buy for investors looking to capitalize on the returns in this industry.


Lowe’s currently has an impressive market cap of $153 billion and trades at a beta of 1.34. The company is happy to reward its investors with dividends; The current annual dividend yield for the company’s shares is 1.4%. In total, there have been five dividend increases over the past six years, and Lowe’s boasts an impressive 16% annual dividend growth rate over five years.

LOW’s latest earnings report was a joyful experience for investors, showing a 3.5% increase in earnings. The consensus estimate for the report was $1.72 and the company reported quarterly earnings per share of $1.78, beating the estimate by a total of six cents.

The company is no stranger to winning streaks; it has done so in each of its last four reported wins. Lowe’s average earnings surprise over this period is a good 12.9%.

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Lowe’s has been committed to providing care and support to its employees in times of need. In its most recent report, the company proudly announced that it is giving its frontline workers a massive discretionary year-end bonus of nearly $270 million, citing their dedication and hard work during the pandemic. In general, companies that show a lot of consideration for their employees achieve greater success because of the mutually beneficial relationship.

The home improvement giant’s current earnings multiple stands at 19.1x, down about 19% from its peak of 23.6x last December. LOW’s share price is down nearly 12% year-to-date, which presents a good opportunity to buy the stock at a discount that has steadily increased earnings.

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Additionally, Lowe’s trailing-12-month revenue of $96 billion places the company in a very impressive eighth out of 261 similar companies in the industry. The industry giant’s revenue has topped estimates in each of its last four reports and has an average surprise sales of $6.56 million.

LOW currently has an ESP Score of 0.33% and a Value Style Score of C, Growth Style Score of C, and Momentum Style Score of A. His overall VGM is a B and a Zacks Rank #2 ( Buy). EPS growth of 12.1% is expected over the next three to five years.

home depot

Home Depot’s current market cap is much higher at around $341 billion, trading at a lower beta of 1.06. The company’s annual dividend yield is 2% and has delivered an admirable 18.7% annual dividend growth rate over five years for both investors and investors.

HD’s most recent earnings report surprised by a modest 0.31%, which heralded four consecutive upside EPS surprises over the past four reports, taking the most recent EPS to $3.21 per share. The average surprise over the period for Home Depot is also in the double digits at a respectable 11.1%.

HD recently stated in a proxy statement that it cares about its employees, which is a very important aspect of its culture. The company added nearly eye-opening $2 billion in compensation and benefits to its employees in fiscal 2020, citing their hard work and dedication to the company. The COVID-19 benefits have been converted into permanent compensation improvements adding $1 billion in additional spend on an annualized basis.

The company’s current P/E is 21.1X, down 23% from its peak of 27.6X. The price development was also not favorable for HD; it’s down nearly 22% year-to-date. Home Depot’s forward earnings multiple is up 5% from its low of 19.9x in late February, telling us the stock price is rising faster than earnings.

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The company’s trailing-12-month revenue of $151 billion places it nearly at the top of its entire industry at number three out of 261. HD’s revenue has surprised in each of the last four reports, with an average surprise of 4.2%.

Home Depot’s current ESP Score is 0.51%, has a Value Style Score of C, a Growth Style Score of D, and a Momentum Style Score of C. His overall VGM is a C and is currently a Zacks Rank No. 3 (hold). ). Over the next three to five years, Home Depot is expected to grow its earnings by 9.8%.


Home Depot and Lowe’s are both stocks that offer great exposure to the home improvement industry and also allow investors to get into the retail sector. However, one of these names seems to be a bit stronger than the other.

After a comparative evaluation and a closer look at earnings reports and key financial metrics, a conclusion can be drawn as to which name is considered a better investment.

Within the above metrics, Home Depot outperforms Lowe’s in market valuation, revenue, beta, and dividend yield. Lowe’s has a higher average earnings surprise, lower P/E, higher VGM score, higher projected EPS growth over the next three to five years, and most importantly, a higher Zacks Rank #2 (Buy) than Home Depot.

Based on the comparison above, I believe Lowe’s is a better potential investment in this industry than Home Depot right now.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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