Home Depot Vs. Lowes

Topics: Financial ratios, Investment, Financial ratio Pages: 2 (480 words) Published: September 30, 2013

For my report I chose The Home Depot, Inc. (HD) on the NYSE. The Home Depot’s fiscal year ended February 3rd 2013. The information used in this report came from the company’s annual report. This company is clearly a retailer. It purchases home improvement goods from manufacturers and resells those goods to the consumer. I chose the Home Depot because I am very familiar with the home improvement industry having spent ten years working in the field. While I was working on homes professionally, I became quite familiar with the Home Depot, and how the retailer operates from a consumer’s point of view. I have my own beliefs about why it is the premier home improvement retailer; I would like to be able to back up my beliefs based on anecdotal evidence with financial facts. The Home depot has a profit margin of 6%. When compared to Lowes which has a profit margin of 3.88% you can see this profit margin puts home depot in a very strong position. In addition to Lowes the industries profit margin is 3.87%. Home depot has a profit margin more than 50% higher than Lowes, and the similarly place industry average. This means The Home Depot is using each dollar more efficiently, and therefore making more money by a wide margin than their competitor. The Home depots return on assets is 11%. Lowes has a much lower return on assets at 5.91% and the industry average is even lower at 5.86%. The return on investment for the Home Depot is more than double that of Lowes and the industry standard. This means that the Home Depot makes far more for every dollar of assets than their competitors. The Home Depot’s return on equity for last fiscal year was 26%. Lowes return on equity was 12.81% and the industry average was 10.55, both considerably lower than the Home Depot. This says that the investor’s equity is worth considerably more than double Lowes and the industry average. Home Depot’s Current ratio is 1.34x. Lowes has a current ratio is 1.27, and the industry average is 1.17....
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