Home Depot: Currently the Most Priced Stock in Housing

Sell-off in Asian currencies move from bad to worse
Sell-off in Asian currencies move from bad to worse

Home Depot, whose shares have advanced by about 190%, in a span of the last five years, is believed to have emerged as one of the best players in the housing revival. Home Depot has almost doubled its performance against the biggest competitor Lowe’s in this duration, making it difficult to judge whom the leader is.

The recent quarter, marked a 7% advanced growth, which smashed the 1% plummet shown by Lowe’s. Unlike its peer, Lowe’s, that is struggling with the falling same-store sales, Home Depot has now come up with ways to profit from the refreshed housing upturn and maintain the post-hurricane Sandy impetus.

Profits have advanced by 18%, supported by sustained margin improvements, which entails a year-over-year climb of 20 basis points in gross margin. The Operating margin, which contributes 22% surge in operating income, moved up by 130 basis points. The company managed to earn 83 cents per share or USD1.22 billion, which overpowered the Street speculation by 8%.

The growth of 4.3% in overall comps, was no less than impressive, this is used to track the sales performance of stores that have operated for one year at least. The outperformance by Home Depot is speculated to steal the market share in some important categories like building supplies and housing fixtures that pitched after Hurricane Sandy.

After the housing bubble crashed, Home Depot and Lowe’s have been in a neck-to-neck race in proving that it is the home, where all the shelter points lie. The race continues, but both companies have managed to offer the best yields in the market over the past two years.

Analysts are still not sure about the divergence that both companies have shown in the last quarter in terms of performance, which is expected to continue for next two to five years, maybe. The high earnings of Home Depot indicate a strong management team and Lowe’s are expected to catch up. As per new traders, currently Home Depot is the market leader and Lowe’s may upturn this, but it is to remain as it is for the coming few years.