Lowe's Home Depot Case Study

If you have ever done any home repairs or worked out in your yard, you have probably been in a Lowe’s home improvement store. Lowes’s has an extensive inventory of building supplies, home improvement products, as well as appliances. However, just because a store is fun to shop at does not indicate that it would be a good investment. Therefore, even though a head to head price comparison on products purchased at Lowe's was less expensive than Home Depot, I would not invest in Lowe's because home depot is in the same sector and has better financial statistics than Lowes', as indicated by their return on asset of $.09 vs Home Depot's $.19.
Lowe’s started out as a local hardware store named North Wilkesboro Hardware Company. This single hardware
Their focus is primarily in the United States; however, they also operate 299 locations in Canada and ten home improvement centers in Mexico. This number of stores pales in comparison to their 2,129 locations across the United States. Their main competition in the home improvement sector remains the number one home improvement store in the world, The Home Depot (Bethel University, 2017). However, because of their diverse product offering, they also compete with other hardware chains and big-box retailers, such as Ace Hardware and Best Buy. Lowe's has grown its product lines over the years and now offer both nationally recognized brands such as Whirlpool, GE, and Samsung, as well as private brands, like Kobalt tools and Harbor Breeze ceiling fans. Lowe's combines low-cost provider strategy with superior customer service to differentiate themselves from
However, with all the information available in a 10k, it can be difficult to compare one company to either another company or the sector as a whole. This is where ratios come into play. Ratios are used in order to compare one company to another. While they cannot be used to predict future performance, they can be an effective tool to let an investor know how the company has done in the past (Bethel University, 2017). Below are eight of the most commonly used ratios to analyze a company’s financial performance.
Cash Ratio Cash is king in real estate and it is also king in the operation of a business. It does not matter how much of a certain product or service a company sells, if it does not have the cash to pay its employee and creditors, it will not last. Lowe’s has $.05 cash for every dollar of liabilities. The reason this sounds low is that it is. For the same period, Lowes’ largest competitor, Home Depot had a cash ratio of .179 (Home Depot, 2017). This means that Lowe’s has less than one third the cash on hand that Home Depot does.
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