Home Depot (HD) is positioned for long-term outperformance against Lowe's (LOW), primarily due to its significantly larger market presence with $159.5 billion in annual sales and strategic focus on expanding its professional contractor customer base through recent acquisitions. While both retailers posted modest Q2 same-store sales growth (HD at 1.4% vs. LOW at 1.1%), Home Depot's higher P/E ratio of 27 compared to Lowe's 20 indicates stronger market expectations for its future growth, underpinned by its scale and diversified customer strategy.
Key PointsHome Depot and Lowe's are the two largest home-improvement retailers. Home Depot has a higher market share. Home Depot has been expanding to serve professional contractors. - 10 stocks we like better than Home Depot › Home Depot and Lowe's are the two largest home-improvement retailers. Home Depot has a higher market share. Home Depot has been expanding to serve professional contractors. The top two market participants, Home Depot (NYSE: HD) and Lowe's (NYSE: LOW), dominate the home improvement retail sector. Although they're competitors, they do have key differences that are important to understand. Turning to the equity performances, Home Depot has outperformed Lowe's stock. Over the last three years through Sept. 29, the former gained 46.2% compared to the latter's 33%. Both have underperformed the S&P 500's 83%, however. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Which one is poised to deliver better returns to investors? I think Home Depot will outperform Lowe's over the long haul. Here's why I believe so. Larger presence Home Depot has a much larger store count and produces higher annual sales than Lowe's. This size means it can provide attractive prices and convenience to professional and do-it-yourself customers. Home Depot had 2,347 stores at the end of fiscal 2024 (Feb. 2), which produced $159.5 billion in sales. That's much higher than Lowe's 1,748 stores that generated $83.7 billion in sales. Of course, while Home Depot's larger size and market share convey certain advantages, it wouldn't mean much if the company produced sluggish sales growth. However, customers still visit Home Depot's stores and website. Despite consumers cutting back on major home improvement projects, the company's second-quarter same-store sales (comps) increased 1.4% after excluding foreign-currency translation effects. Lowe's quarterly comps increased a respectable 1.1%. Still, Home Depot's greater presence puts the company in a better position to benefit. And it's also appealing to a wider customer base. Expanding customer base Home Depot has also made major investments to expand its customer base to professional contractors. This head start gives it a leg up on Lowe's. Its effort to grow its reach to professionals includes a dedicated sales force and a loyalty program. Its push includes last year's acquisition of SRS, which distributes roofing products, landscape supplies, and swimming pool supplies. Its products cater to the professional roofer, landscaper, and pool contractor. Additionally, earlier this year, Home Depot agreed to acquire GMS, a distributor of specialty building products like drywall, ceilings, and steel framing. These efforts will likely boost long-term sales growth. Contractors will likely buy more materials in bulk, albeit at a lower price. While that may result in a lower gross margin than individual customers, Home Depot's 33.4% second-quarter gross margin is just 0.4 percentage points lower than Lowe's 33.8%. Expecting a higher return on capital Home Depot's management has a well-defined and shareholder-friendly capital allocation policy. Its three priorities, from highest to lowest, are investing in the business, repurchasing shares, and paying dividends. This has generated high returns for shareholders, even if they have dropped over the last few years. Home Depot produced a return on invested capital (ROIC) of 27.2% for the 12 months through the second quarter. Lowe's management actually produced a higher ROIC, 29.5%. However, the home improvement sector has been under pressure for a couple of years. In 2022, before Home Depot's profits dropped, it generated an ROIC of 44.6% compared to Lowe's 30.4%. When people take on major renovation projects, out of necessity or desire, Home Depot's sales and profit growth will undoubtedly accelerate, and ROIC will rebound. The market certainly has higher growth expectations for Home Depot, based on the stock's price-to-earnings (P/E) ratio. Home Depot has a P/E multiple of 27 versus Lowe's 20 P/E ratio (at the time of this writing). However, given that it appears Home Depot is in a better position to benefit over the long term, the higher valuation looks warranted to me. Should you invest $1,000 in Home Depot right now? Before you buy stock in Home Depot, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Home Depot wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $621,976! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,150,085! Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 191% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor. Stock Advisor returns as of September 29, 2025 Lawrence Rothman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Home Depot (HD) is presented as having a superior long-term outlook compared to its primary competitor, Lowe's (LOW), based on its larger market scale and a strategic pivot towards the professional contractor segment. Financially, Home Depot's dominance is quantified by its $159.5 billion in annual sales from 2,347 stores, significantly eclipsing Lowe's $83.7 billion from 1,748 stores. This scale contributes to its recent performance, where HD posted a 1.4% increase in Q2 same-store sales, slightly outpacing LOW's 1.1% growth amidst a challenging consumer environment. The core of Home Depot's forward-looking strategy involves targeted M&A, including the acquisitions of SRS and GMS, to capture a larger share of the professional market. While this may slightly pressure gross margins—HD's 33.4% is just below LOW's 33.8%—it is expected to bolster long-term sales. The market appears to be pricing in this strategic advantage, awarding Home Depot a P/E ratio of 27 versus Lowe's 20. Although Lowe's currently has a higher trailing ROIC at 29.5% to Home Depot's 27.2%, the analysis highlights HD's significantly higher pre-downturn ROIC of 44.6% in 2022 as evidence of its stronger earnings potential in a normalized housing market.
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