Two sort of factual questions.
1. To Jesus_loves: Ok, I like HD at these prices & own some.(Word up brother, go team, etc.)
But I am confused about one point you made ... how does $9/share of book value tell you $40/share of liquidation value? You lost me.
2. To LOW fans: Ok, let's say I've screwed up by buying HD over LOW. So what am I missing?
Should I dump my HD and buy LOW? What is it about LOW that makes you folks pay 50% more for each dollar of earnings? In my amateur opinion, HD seems to be holding some good cards (got these right off Yahoo site):
Mkt Shr...big...........half as big
who see much
difference...?? %.........?? %
Can someone help me out here? Am I the only one who likes the left-hand column better?
---Beginner in New York State
Key, You and I are on the same wave length here, perhaps with one small exception. I too like LOW's current situation, but I believe HD is becoming quite oversold. I continue to recommend positions in both stock, perhaps in the neighborhood of a 3:1 ratio. HD would benefit smartly from a positve earnings or revenue surprise. I think most ot the bad news is factored into the price.
They are not the same value (equivalent). LOW's EPS is $1.73, HD's 1.56: a difference of $.17 (per yahoo). LOW's EPS is better by over 10%.
HD had a $2B buyback that will (or has already?) increase(d?) its EPS but has done nothing for the stock price. Tuesday they will probably beat their REVISED esitmates and have -10% SSS.
Respectfully, I'm trying answer a question you came here and asked. Long term, you should do fine with you HD investment, but in my opinion, LOW will perform better. If you wanted sunshine blown arse-ward, you should try gatorama (said HD was guaranteed to reach $30 by EOY 2002) or wavedawg (pumped HD all the way from the $50s)on the HD board. I think HD will see the teens before it sees 30 again. I'll agree to disagree and agree to talk about it later when the 'shakeout' happens. Once again, good luck.
Sure: LOW is smaller and in principle could grow more. And if LOW and HD were in different markets I could even agree with you.
But HD and LOW are near-clones. As they move into the same geographic areas, they are competing to saturate the _same market_.
LOW faces the same saturation point as HD if they both continue the game of chicken.
If this point seems abstract to you, let's correspond again at shakeout time.
Regarding HD's decline in share price ...
if you have any actual money riding on this, you should be careful to distinguish the stock market from the home-improvement market.
These two very different arenas share just one crucial element: lower price for equivalent value is better for the buyer.
>>Re your hypothesis that Lowe's will enjoy an advantage due to operating in smaller markets ... well, anything's possible!<<
I think you maybe missing my point and it is this: That HD has already made the most out saturating the metros, while LOW is just moving into them. LOW is snatching HD' mkt share. It's not what LOW or HD has done (easy to dominate without a competitor), it's what can they do for you. Right now HD is doing NEGATIVE 10% comps while LOW's comps are positive.
Here's the "handicap" of cannibalizing all the major markets:
But do what you like. Good luck.
Outerkay -- Well, thanks for taking a shot at answering my question this time. Yeah, earnings growth has been a few points higher for LOW recently.
Re your hypothesis that Lowe's will enjoy an advantage due to operating in smaller markets ... well, anything's possible!
But unless somebody has done more thinking than outerkay, I think I'll just stay with HD. I get the same eps at a 60% discount & with 85% less debt per share. I'll just try to live with HD's "handicap" of dominating all the major markets.
Good luck all.
First off, we're talking about companies trading at multiples of their book and liquidation values. All companies are being traded based on their prospect of future earnings growth. LOW's deserved premium is based on its higher potential and current growth rate. Take into account that most of LOW's locations are in smaller markets, just barely entering the larger metros, while HD has reached saturation in the metros.
Right off the bat, LOW's EPS is better than HD's. 2ndly, LOW has greater growth potential than HD. LOW has positive comparable sales, while HD's is negative. Finally, look to February 24 & 25 and see the 2002/4q earnings out outlooks for each. Good luck.
Thanks for the help ... but now I feel even more confused. Can I ask just a few more questions?
Why are 10 cents more EPS worth a $14 premium in share price?
If I want quantitative data, where do companies file facts like "Growth Outlook"?
I thought more sales at the same earnings was a bad thing. Don't laugh at me, but that just lowers the profit margin doesn't it? Or do I misunderstand profit margin?
Hope I'm not a total Bonehead & thanks to anyone who has the street smarts to help me out here.