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Lowe's Companies Inc. Message Board

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  • astral_tsar astral_tsar Feb 21, 2003 10:14 PM Flag

    Re: HD v LOW: thanks

    Poor "i_am_a_jackass_too", clinging bravely to one quarter of same-store sales data, wailed,

    "Which numbers"

    LOL, which numbers? which numbers? These numbers. Earnings are the same, LOW is less profitable and weaker financially (e.g. credit rating one full notch lower), and LOW costs (in price + debt per share) nearly twice as much. This is all straight from Lowe's own SEC filings, not some kind of media hype. It's dead, Jim.

    HD____________LOW
    Sales.....$59 billion ..$26 billion
    Earngs....$1.56/share...$1.73/share
    Price.....$21.50/share..$35.00/share
    Debt......$0.60/share...$5.00/share
    Cash......$1.70/share...$1.80/share
    Ret on
    Equity....19%...........19%
    PE/Groth..0.8_..........1.1
    Profit
    Margin....6%............5%
    PE........14............20
    Div Yld...1.1%..........0.3%
    Women Cust.45%..........45%
    Customers
    who see much
    difference...?? %.........?? %

    Why has Lowe's avoided metro areas until now?? Because they didn't want cutthroat competition against an entrenched competitor, presumably. What has changed? How is Lowe's possibly going to survive head-to-head competition? Borrow even more money? More totally unmeasured BS about customer demographics? Poor market share dressed up as an advantage?

    If LOW is growing enough to justify PE of 20, then how come PE/growth is almost 40% *higher* for Lowe's than for HD? (For anyone who feels that same store sales ("SSS") is the only number investers need to know, I'll review: for a growth stock low PEG is better for purchasers, high PEG is worse.)

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    • If you believe, clap your hands.

    • Actually, I think LOW's PEG is slightly lower than HD based on the info on Yahoo. Of course since info on Yahoo isn't always accurate or up-to-date, your calculation may be right as well. Anyhow, all that numbers and calculation don't always translate to definite buy or sell. It's always subject to interpretation and prediction, and how well/bad the company's future is perceived ultimately decides the stock price. After all, the G factor in PEG is forecast.

      Because of all the reasons you mentioned (market leader, cash, profitability..), HD had higher valuation than LOW just a year ago. HD's fall was the result of disappointing the market with disappointing results/outlook, and I think many funds that got in HD for its strong growth got out. In about a year, HD went from growth leader to turnaround play. IMO, current valuation of HD is attractive, but I think there's a strong chance of HD again issueing less than rosy outlook, and I'm not entirely convinced that such risk has all been priced into the stock. So if I were to buy HD, I would wait until their earnings to get an update on their outlook.

      Regarding customer demographics, I never thought there was a big difference between LOW and HD. However, LOW's entering HD's market is a real problem for HD and opportunity for LOW. When an average customer sees a brand-new LOW superstore with bigger and better shopping environment across from the dusty old HD, that customer will go to LOW. In a head-to-head competition, right now, I think LOW will beat HD, and that is because LOW so far has grown to its current size precisely by offering better stores. A while ago, it was HD kicking ass and LOW seemed to be having tough time surviving. But they got much better at their business and began growing faster than HD. If you look at yr-to-yr revenue growth rate for the last 2-3 years, you can clearly see HD's growth beginning to slow down while LOW kept growing. Increasingly LOW's growth has come by stealing sales from HD, so I would say that it is HD that's losing in a head-to-head competition. Of course, HD is a big company with enough financial flexibility to stage a comeback (and they certainly can follow LOW's example), but I think they need to show some sign of resuming growth before HD's stock can recover. Their earnings is expected to drop this quarter and to be flat next quarter, and until they say, "we're back on track", it's unlikely HD will get back to where it was. After all, little growth means low valuation.

    • Have you factored in the future spending of 4 billion for revamping their less than competitive stores to go to updated looks and wider isles ( you know the ones that will make them more desirable like lowe's). into the DEBt ratio's you are so proud of???

    • "Why has Lowe's avoided metro areas until now?? Because they didn't want cutthroat competition against an entrenched competitor, presumably. ... blah, blah, blah"

      We heard that in Atlanta, Dallas, Cali... Lowe's does well in all.

      Lemme ax ya dis. Will Home Depot ever comp again? Na.

 
LOW
54.09-0.06(-0.11%)Sep 19 4:06 PMEDT

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