Lowe s and Home Depot Research Paper

Pages: 4 (1255 words)  ·  Bibliography Sources: 4  ·  Level: Doctoral  ·  Topic: Ecology

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[. . .] When it comes to the financials, in 2015, Home Depot notices an increase in their second quarter sales of 4.2% (Market Watch, 2016). The same good news came for Lowe's which saw an increase in sales of 4.3%. In the second quarter of 2015, Home Depot had a net sales of $24,829 and cost of sales of $16,464 leading to a gross profit of $8,365. Lowe's had a lower net sales of $17, 348 and cost of sales of $11,367 with a gross profit of $5,981. The GAAP EPS for Home Depot was $1.73. The GAAP EPS of Lowe's was $1.20. While Lowe's expects no change in 2016 in terms of shares (it rose to 2% at one point in 2015), Home Depot increased its share value in 2015 by 3%.

Although much can be said of both companies' ability to continue making profits despite economy, so can be said of their stock prices which remain fairly high with a 2015 EPS estimate for Home Depot of $5.30 and Lowe's at $3.29. The consensus price target for 2016 for Home Depot is $130.12 and for Lowe's $79.78. This all has to do with what financial experts perceive as a sweet spot in housing markets.

Considering the financials of both the Home Depot and Lowe's has good and solid figures and there's a prediction of even better figures for the end of this year, it is safe to say both stores are profitable. This again has to do with the housing market. The housing market is a potential risk factor as people that need home improvement items and services rely on these stores. If the housing market is in a bad spot due to the economy, the home improvement stores like Lowe's and the Home Depot might take a hit.

Considering the gross profit each year for the Home Depot has steadily rose almost 2 million, the next three years should see a gross profit of 32 million, 34 million, and 36 million. In terms of cash flow, the net income has increase almost 1 million each year leading to a prediction of 8 million, 9 million, and 10 million for the next three years. In terms of balance sheet, the total current number of assets remained the same for 2014 and 2015. Therefore, the guess would be the same for the next two years with a sharp increase in the third leading to 17 million for 2017, 17 million for 2018, and 18.5 million for 2019.

The Gross profit of Lowe's for the last three years has increase roughly 1 million. Therefore, in terms of income statement, the next three years will see 21.5 million, 22.5 million, and 23.5 million in gross profit (Lowe's, 2016). Total cash flow from operating activities for Lowe's increased 800,000 then dropped roughly 200,000 for 2016. Predictions then are 4.7 million, then 5.5 million, and then 5.3 million. Total Current Assets took a dip in 2015 and then rose in 2016. Predictions for the next three years is 9.9 million, then 9.4 million, and finally, 10.2 million.

Overall, the Home Depot and Lowe's are two strong companies in a strong industry. They both have profits each year increasing by 1 or 2 million in relation to figures. They also have continually managed to exceed expectations when it comes to gross sales and share growth. Both companies do well now that the United States has entered a good position in terms of real estate. They also have shown continued growth store openings that has led to a greater market share.

References

Downie, R. (2016). Home Depot Stock: Capital Structure Analysis (HD). Investopedia. Retrieved 17 September 2016, from http://www.investopedia.com/articles/markets/051416/home-depot-stock-capital-structure-analysis-hd.asp

Lowe's,. (2016). LOW Income Statement - Balance Sheet - Cash Flow -… [END OF PREVIEW]

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