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Battle of the Brands: Home Depot vs. Lowe's

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This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

There are many contrasts between The Home Depot (NYSE: HD) and Lowe's (NYSE: LOW), both of which sell a broad range of tools, fixtures, fittings, garden supplies, and construction materials to do-it-your selfers and professional contractors alike. Home Depot is the original big-box category killer of a hardware store that displaced many a mom-and-pop shop, as well as its predecessors, like Builders Emporium. Lowe's, the new kid on the block has been growing like mad with Home Depot's business in it's cross-hairs.

Both companies have been suffering mightily in the face of the housing slump and the crushing financial markets. Eventually, recession or not, both companies will see their revenues improve as the economy works through it's nightmarish problems.

I have written numerous stories on Home Depot in the past two years, and each time comparisons to Lowe's comes up. Lowe's has not yet had time enough to tarnish its reputation, and Home Depot certainly appears to have misjudged its upstart competitor, as well as recruiting the wrong CEO (Robert Nardelli) and then paying him $200+ million to go away. They have also allowed the stores to become drab and not listened or focused enough on customer or employee issues.

This was beginning to change for the better when the burden of a sagging construction industry expanded.

Home Depot has been trading between a low of $23.77 and and a high of $41.19 over the last 52 weeks with the highs a distant memory. More recently over the past nine months the stock has been hovering around the mid to high 20's.

Lowe's has not been doing much better but has been trading in a tighter range between $19.94 and $33.19, and most recently in the mid 20's.

Both companies have current P/E ratios around 13 and forward P/E ratios projected at 16. This means that based on company projections and Wall Street sentiment Lowe's is not getting any premium based on better growth opportunities. For investors seeking some dividend compensation Home Depot's 3% yield beats out Lowe's 1% yield. In a stagnant market that can be very important but once the market picks up trading 2% yield against a Lowe's faster growth rate might be a mistake.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of HD or LOW.

Vote in our poll for Home Depot or Lowe's as your preferred brand, and let us know in the comments why you love it.

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Last updated: November 08, 2009: 11:40 PM

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