We find Home Depot to be overvalued versus Lowe's. Here are the factors we considered:
P/S Ratio
HD's P/S multiple of 2.5x is
substantially higher than the figure of 1.7x for LOW
Revenue Growth
Over the last twelve months, Home Depot has seen revenues change by 19.9% -
comparable to the figure of 18.9% for Lowe'sIn the twelve-month period before that, revenues for Home Depot had changed by 1.9% -
comparable to the 0.9% change for Lowe's
Operating Margin
Home Depot's operating margin was 13.9% for the most recent twelve-month period, which is
higher than Lowe's's operating margin of 8.4%Over the last twelve months, the operating margin for Home Depot changed by -0.6 pp (percentage points) -
worse than the change of 2.7 pp for Lowe'sIn the twelve-month period before that, the operating margin for Home Depot had changed by 0 pp -
better than the change of -1.4 pp for Lowe's over the same period
Note: HD reports its results on a fiscal year ending 0/22andLOW reports its results on a fiscal year ending 1/31
Home Depot Lowe's Valuation: Current Market Cap $336 Bil $146 Bil Current P/S Multiple 2.5x 1.7xHome Depot substantially higher Revenues: Total Revenue (LTM) $132 Bil $85 Bil LTM Revenue Growth (Current) 20% 19%Similar for both companies LTM Revenue Growth (Year-ago) 1.9% 0.9%Similar for both companies Operating Income/Margin: Operating Income (LTM) $18 Bil $7.2 Bil Operating Margin (LTM) 14% 8.4%Home Depot higher LTM Margin Change (Current) -0.6 pp 2.7 ppHome Depot worse LTM Margin Change (Year-ago) 0 pp -1.4 ppSimilar for both companies