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How Do Valuation Multiples of Home Depot and Lowe’s Compare?

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Jun. 6 2019, Updated 3:07 p.m. ET

Home Depot’s valuation multiple

The lower unemployment rate, wage inflation, and the Fed toning down its aggressive rate hike stance have led to an increase in Home Depot’s (HD) stock price since the beginning of 2019. The surge in Home Depot’s stock price has raised its valuation multiple. As of June 5, the company was trading at a forward PE multiple of 18.9x compared to 16.8x at the beginning of this year.

Also, on the same day, Home Depot was trading at 19.4 times analysts’ EPS estimate of $10.14, and 17.9 times analysts’ EPS estimate of $11.00 with its EPS expected to rise by 2.5% in 2019 and 8.6% in 2020.

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Lowe’s valuation multiple

Despite the recent fall in its stock price, Lowe’s (LOW) has returned 4.2% YTD. The increase in Lowe’s stock price has raised its valuation multiple. On June 5, the company was trading at a forward PE multiple of 16.3x compared to 15.5x at the beginning of this year.

Also, on the same day, Lowe’s was trading at 17.3 times analysts’ 2019 EPS estimate of $5.58, and 14.6 times analysts’ 2020 EPS estimate of $6.60 with its EPS expected to rise by 9.4% in 2019, and 18.4% in 2020, respectively.

Analysts’ recommendations

Analysts are favoring a “buy” rating for Home Depot. 67.6% of the 34 analysts that follow Home Depot have given a “buy” rating, while 32.4% are recommending a “hold” recommendation. Analysts’ 12-month price target for HD stands at $207.03, implying a return potential of 5.3% from its stock price of $196.69.

Analysts have a “buy” recommendations for Lowe’s. 68.8% of the 32 analysts covering the stock have given it a “buy” recommendation, while the remaining 31.3% have given it a “hold “recommendation. Analysts’ 12-month price target for Lowe’s stands at $113.86 with a return potential of 18.3% from its stock price of $96.25.

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