Investors looking for companies that may benefit from the housing recovery should take a close look at home improvement store chains, Home Depot (NYSE:HD) and Lowe's (NYSE:LOW). In the last year, the stocks of the two companies have been up sharply, with Home Depot up close to 70% and Lowe's close 40%. But which stock is a better bet for the future?
Home Depot. Though the company commands a higher valuation than Lowe's in terms of forward PE, it beats Lowe's in terms of operating margins, and revenue and earnings growth, which reflect four areas of strength:
First-Mover Advantage. A pioneer in the home improvement area, Home Depot occupies prime locations that offer customer convenience.
Scale: Home Depot is 1.5 times larger than Lowe's with $71.38 billion in revenues versus $51.8 billion.
Bundling: Home Depot has been a pioneer in bundling products with services, making it easier for customers to find out the materials they need for DIY projects or hire professionals for DIFM projects.
Culture: From its early days, Home Depot has fostered a corporate culture that of the "inverted pyramid, " which puts customers and sales associates first.
Home Depot and Lows Financials
Quarterly Earnings Growth
Quarterly Revenue Growth
*January 29, 2014
**February 3, 2014
Source: Yahoo. Finance.com