An Analysis of Home Depot and Lowes

Topics: Dividend, Revenue, Financial ratio Pages: 19 (5515 words) Published: September 1, 2009
An Analysis of Home Depot and Lowe’s

Learning Team A:

FIN324 – Financial Analysis for Managers

Table of Contents
II.Company Selection – Overview of Home Depot and Lowe’s A.Company’s Product or Service
B.When the Companies Started
C.Financial Statements and Auditing Companies
D.Company Industry and Ranking
E.Stock Ticker Symbol
III.Ratio Analysis and Statement of Cash Flow
A.How The Companies Generate Their Cash Flow
B.Significant Internal Events That Affected The Company’s Cash Position (Based on Cash Flow) C.Revenues and Net Incomes Over the Last Three Years
D.Companies’ Solvency, Liquidity, And Profitability Based On Current Ratio, Return On Sales, Earnings Per Share (EPS), Debt Ratio, And Price Earnings Ratio, Compared With Industry Standards IV.Analysis of Stocks for both Home Depot and Lowe’s

A.Price History
B.Types of Stock Dividends
D.Outstanding Shares and Splits
VII.Tables and Charts

During the five weeks of the course, Financial Analysis for Managers 1, Team A undertook the project of assessing two companies in the specialty retail industry, namely Home Depot and Lowe’s. Both companies compete for the same target market – do-it-yourself home improvers and private building and home improvement contractors. Both companies offer a diverse array of products. Both companies are listed on the New York Stock Exchange (NYSE), and have prepared and submitted reports to the Securities & Exchange Commission (SEC).

This analysis will discuss the history of the two companies, explore their differences and similarities (both operational and financial), and assess the risk of owning stock in both companies, as well as derive some predictions about the future of both companies based on the analysis. II.Company Selection – Overview of Home Depot and Lowe’s A.Company’s Product or Service

Both Lowe’s and Home Depot offer a wide variety of items for do-it-yourself-ers and professional builders and contractors. In addition, they offer remodeling services, contracting with independent skilled crafts persons to complete work for their customers.

Lowe’s 40,000 product offerings in 2002 included plumbing and electrical supplies, tools, lumber, millwork, home fashion items, gardening products, major appliances, and consumer electronics. Lowe’s has an exclusive contract with Snap-on Tool’s Kobalt-brand professional mechanics’ tools, and allows commercial customers to special order items not stocked in the stores (Hoover’s, 2003).

Home Depot also carries more than 40,000 kinds of building materials, home improvement supplies, lawn and garden equipment, and appliances. To remain competitive with Lowe’s, Home Depot plans to add rugs, appliances, and bathroom hardware. The company has also opened a few pilot Home Depot Supply stores for contractors and rents out heavy equipment. In addition, the company is purchasing three flooring companies whose products are used by 17 out of the top 20 homebuilders in the United States: Floors, Inc., Arvada Hardwood Floor Company, and Floorworks, Inc. Also, Home Depot features more than 40 EXPO Design Center stores that contain large design showrooms featuring bath, kitchen, flooring, and lighting products (Hoover’s, 2003). Future plans include expanding the company’s Design Place, targeted at female customers through its focus on home décor categories. Additionally, Home Depot will expand its tool-rental program to 80% of its stores by 2005 (Hoover’s, 2003). B.When the Companies Started

Lowe’s is a 56-year-old company that started in 1947 employing more than 110,000 people. Lowe’s employees own approximately 7% of the company’s stock through the company's Employee Stock Ownership Plan (ESOP) and its 401(k) plan (Lowe’s, 2003). Lowe’s has been a publicly held company since October 10, 1961. Its stock is listed on the New York...

References: E. Stock Ticker Symbol
Home Depot’s common stock has been publicly traded on the New York Stock Exchange under the symbol HD since 1981 (Home Depot, 2003)
Gross Profit % Sales 30.2% 29.9% 29.7%
Home Depot’s revenue for the fiscal years of 2001, 2000 and 1999 were respectively $53.6, $45.7 and $38.4 billion dollars
Home Depot Lowe’s
Debt Ratio (2002) 6.47% 1.95%
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