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With a weak economy, there has been a resurgence in do-it-yourself, grow-your-own, and other self-reliance type projects.

The stock of Home Depot (NYSE:HD) is up 24.1% over the last 12 months. The S&P 500 is only up 4.3% during that same period of time.

The stock of Lowe's (NYSE:LOW) is up 5.3% over the last 12 months. Again, the S&P 500 is up 4.3% during that same period of time. Maybe Lowe's is a nice value play at the current time.

The stock of lesser known but faster growing Tractor Supply (NASDAQ:TSCO) is up a whopping 77.2% over the last 12 months. Tractor supply has navigated its way through the same market and the same economy that Home Depot and Lowe's have navigated through.

With Tractor supply up so much over the last 12 months, maybe it is grossly over-valued at this level. Maybe it is a better short candidate than a long candidate.

This is the dilemma that every investor faces on a day to day basis in the market. Is it better to go with the bigger, well-known, widely held stocks? Is it better to go with momentum or value? Is it better to go with the smaller, faster grower even though it has moved significantly higher over the last 12 months?

When faced with such a dilemma, I deal with them in a methodical, analytical approach. It has been my experience over the years as a professional money manager and stock analyst that it is best to weigh all of the previously mentioned factors when choosing stocks.

Let's first take a look at the fundamentals, performance and valuation of Home Depot. I think it could be easily argued that Home Depot is well past its prime as a growth stock. This Atlanta-based company is currently $58 billion in market cap, and its earnings have slowed to a crawl during the recent massive slowdown in home-building and remodeling. Analysts do expect the company to grow earnings at about a 14% clip over the next five years.

The performance of Home Depot looks like this at the current time:


Data from Best Stocks Now iPhone App

As you can see, Home Depot has had a pretty good run over the last three years. Over the last five years, it has outpaced the market by a decent margin, but over the last 10 years it has slightly underperformed the market. It should be noted that the stock held up very well in 2008 when the market was down by 38.8%.

Home Depot gets an "A" momentum grade on it's short term performance. The stock earns an overall performance grade of "B-" when compared to 2,700 other stocks. It gets a very good safety grade of "B+" with its relatively good 2008 performance.

Now lets look at the current valuation of Home Depot:

Data from Best Stocks Now iPhone App

The stock of Home Depot is currently trading at about 14X forward earnings with an expected five year growth rate just about the same. This does not create a favorable PEG ratio.

With EPS estimates of $2.68 and a consensus five year growth rate of 13.9%, Home Depot would be earning $4.50 per share five years down the road. I use a multiple of 14 to come up with a $62.00 five year target.

I like to buy stocks that have 80%-100% upside potential. Home Depot currently has 77% upside potential. Home Depot only scores a "B-" on valuation.

Now let's look at Home Depot's overall grade and ranking as compared to 2,700 other stocks:

Data from Best Stocks Now iPhone App

Home Depot scores an overall grade of "A-" under my proprietary grading system. It comes in at 573 out of 2,702 stock, not good enough for me.

Now let's do the same analysis of Lowe's. Lowe's is a $28 billion, large-cap stock,headquartered in Mooresville, North Carolina. Here is a snapshot of the stock's performance:

Data from Best Stocks Now iPhone App

Lowe's has underperformed the market on a short and intermediate-term basis. It has slightly outperformed the market on a long-term basis, however. Lowe's scores a momentum grade of B+, but only an overall performance grade of C-. Lowe's also held up well during 2008 with just a 3.3% drop.

Now let's look at the current valuation of Lowe's:

Data from Best Stocks Now App

Lowe's is also trading with a PEG ratio of about 1:1. This is not a favorable valuation characteristic for a growth stock.

With a next year estimate of $1.75 per share and a projected five year growth rate of 13.3%, Lowe's would be earning $2.88 per share five years from now. I am using a multiple of just under 13X for Lowe's to come up with a five year target price of $37.35 per share.

Lowe's has 77% upside potential over the next five years. It too scores a "B-" grade as it relates to valuation. Once again, not quite good enough for me.

Overall, Lowe's scores a very boring overall grade of "B." I have it ranked at 1,319 out of 2,702 stocks when I take into account its performance, safety and value.

Data from Best Stocks Now iPhone App

Now let's look at a much lesser known mid-cap stock by the name of Tractor Supply. The company has a market cap of just over $5 billion and is headquartered in Brentwood, Tennessee.

Here are what the performance numbers of this mid-cap currently look like:

Data from Best Stocks Now iPhone App

As you can see, Tractor Supply has clobbered the market over the last one year, three years and 10 years. It also held up very well during the big sell-off of the market in 2008.

Tractor Supply scores an "A+" rated momentum grade and an overall performance grade of "A+." Now, we are starting to talk my language.

Buying stocks just because of performance is not a wise thing to do, however. We have learned time and time again that valuation does matter. In my opinion, buying stocks just because of valuation is not a wise thing to do either. I address this subject at length in an article that I recently wrote here on this website.

Let's therefore, look at the current valuation of Tractor Supply:

Data from Best Stocks Now iPhone App

The forward PE ratio of the stock is currently greater than its growth rate. Once again, not a favorable PEG ratio. The stock is expected to earn $3.37 per share next year. The stock has been growing earnings by 21% per year over the last five years and is expected to continue to grow by 17% per year over the next five years.

At this rate, Tractor Supply will be earning $6.36 per share five years from now. Tractor Supply deserves a much higher multiple than Home Depot and Lowe's due to its superb growth. The PE of Tractor Supply is 27, while the stock has ranged between 16-26 PE ratio over the last five years. I am using a multiple of 23 to come up with a five year target price of $140 per share.

In my opinion, the stock has 94.2% upside potential over the next five years. Yes, there are a lot things that can happen both to the upside and to the downside over the next five years, but these are the numbers that expected at the current time. The stock gets an "A" valuation grade based on its upside potential.

Overall, Tractor Supply earns a very rare "A+" overall grade in my proprietary grading system. Tractor Supply comes in at number 2 out of 2,702 stocks. It should also be noted that I recently had the CEO of Tractor Supply, Jim Wright, on my Positively Wall St. radio show recently. You can visit here to hear the archive of that interview.

Data from Best Stocks Now iPhone App

Home Depot, Lowe's, or Tractor Supply? To me, the choice is an easy one.

Source: Home Depot, Lowe's Or Tractor Supply? Reviewing Home Improvement Stocks