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The Home Depot, Inc. (HD) or Lowe’s Companies, Inc. (LOW) — Which Is a Better Pick?

The housing market has been recovering well lately. People have started spending on new homes as builders have begun to build new houses and apartments at a higher annual rate of 896,000 for the month of July.

Also, there has been a lot of optimism among U.S. homebuilders as demand for new homes increases. Confidence among homebuilders is at an eight-year high, as reported by the Wells Fargo builder sentiment index.

The Home Depot, Inc. (NYSE:HD)An improving housing sector has spurred demand for related products as well, which has paved the way for home-improvement retailers to grow. Hence, players such as The Home Depot, Inc. (NYSE:HD) and Lowe’s Companies, Inc. (NYSE:LOW) are enjoying higher demand for their products.

A quick look at the stock-price movement of these two companies in the last two years will give a better picture of how both retailers have recovered from the effects of the economic slowdown.

LOW Chart

Lowe’s data by YCharts

Both of the retailers have been growing steadily, especially The Home Depot, Inc. (NYSE:HD). The company reported its recent quarter, which witnessed a 9.5% increase in its top line and a jump of 17% in its bottom line as customers spent more money. Also, shoppers bought more bigger-ticket items, which drove revenue higher. This enabled the home-improvement retailer to raise its earnings outlook for the year to $3.60 per share, along with a sales growth of 4.5%.

However, Lowe’s Companies, Inc. (NYSE:LOW) has been performing well too, trying to bridge the gap with its largest competitor. Its recent quarter was a great example wherein it beat analysts’ expectations. Its same-store sales growth, a key metric to gauge a retailer’s performance since it ignores the effect of stores opened or closed during the period, was pretty impressive at 9.6%. This was quite close to The Home Depot, Inc. (NYSE:HD)’s metric for the quarter, which stood at 10.7%.

Also, if we look at the stock price appreciation in the last year, Lowe’s Companies, Inc. (NYSE:LOW) outperformed The Home Depot, Inc. (NYSE:HD). Its return to investors was double that of its competitor, as highlighted in the chart below.

LOW Chart

Lowe’s data by YCharts

Lowe’s Companies, Inc. (NYSE:LOW) key strategy of offering the lowest price possible seems to be working really well, driving revenue higher by 10.3% to $15.7 billion and pushing earnings up by 26% to $941 million. Also, it has been offering permanently low prices on many items across its stores, which attracted a lot of customers.

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