1 Reason Lowe's May Be a Smarter Buy Than Home Depot Before Aug. 19
2026-08-10 10:30
•Neil Patel •The Motley Fool
•••••• •• Axe Cap view
Why Lowe's Looks More Attractive Than Home Depot Right Now
Lowe's trades cheaper than Home Depot but shows faster earnings growth, making it an interesting value play for cautious investors.
Investors often favor Home Depot as the go-to US home improvement retailer, but Lowe's deserves a closer look. Despite both facing pressure from higher interest rates and inflation, Lowe's trades at a 26% discount compared to Home Depot based on forward earnings multiples (16.5 versus 22.3). The key: Lowe's has reported faster earnings growth in the last five years and is expected to grow at a similar pace going forward. Its recent acquisitions signal strategic moves to diversify and build long-term value. The upcoming Q2 earnings could provide a fresh catalyst. South African investors won’t find direct JSE equivalents, so keep a watch on USD/ZAR—the rand's strength will influence the local attractiveness of these US-listed assets. This view hinges on Lowe's continuing to manage costs and innovate. Should macroeconomic pressures worsen or growth stall, Lowe’s discount might not hold. this is just our opinion and not financial advice
Given the valuation gap and growth potential, I would watch Lowe’s closely and consider building a position on any dips before Q2 results. I'd hold off on Home Depot for now, as its premium seems less justified.
- LOW
- HD
- USD/ZAR
- Worsening US macro conditions hurting consumer spending
- Rand volatility impacting offshore-return translation
6/10
Both Lowe's and Home Depot have underperformed the market due to macroeconomic headwinds including elevated interest rates and inflation. However, Lowe's presents a better buying opportunity as it trades at a 26% valuation discount to Home Depot (forward P/E of 16.5 vs 22.3), despite demonstrating faster earnings growth from fiscal 2020-2025 and comparable future growth expectations.
Our take is based on reporting first published by The Motley Fool.