6) Growth Estimates and Profitability
Analysis and comparison of a company growth rate and the industrial growth rate are fundamental as it enables the company to understand how the various companies in the same industry differ with the company financially.
Home depot growth estimates are estimated to be 14.52% for the next five years. Home Depot growth rate is higher than the industrial growth rate of 13.08 %. (Finance.yahoo.com) The reason for such variance can be attributed to various factors. Key amongst them is Home Depot stage in its life cycle. Home depot growth is higher than the industry since it has already its maturity stage and has already conquered the vast portion of the Home improvement market in comparison to its competitors.
Also importantly, the high growth rate than the industrial average can be attributed to the recent changes in its operation strategies and other fundamental competencies that have delivered huge margins and returns to the firm. Also importantly, the expansion to various states in the country has resulted in such high growth rates than the industry growth rates. Lastly, the fact that Home Depot has the largest market share in the home improvement market can be a factor that has contributed significantly to such high growth rates.
Lowe’s growth rate is estimated to be 18.20 % in comparison to 13.08 % industrial growth. The reason for such an enormous variance can be hugely related to the stage of Lowe’s in its life cycle. Lowe’s is in the process of expanding and growing into the Home improvement market and has higher growth potential than already matured companies such as home depot.
Lowe’s has a higher Price earnings ratio that stands at 22.63 compared to 22.45 industrial averages. This means Lowe’s investors expect more earnings in future than the industrial standards. Therefore, it would be very much profitable to invest in Lowe’s than home depot that has a price earnings ratio of 21.91, which is less than the industrial average.
Lowe’s stands a better chance to expand into the home improvement retail industry to reach Home Depot operating sphere. The future is still bright for Lowe’s as well Home Depot since opportunities for growth still exist in the market. However, Lowe’s must drive serious and fundamental business initiatives in order to meet its growth estimates and surpass Home Depot.
Work cited
Finance.yahoo.com,. ‘HD Analyst Estimates | Home Depot, Inc. (The) Common S StockYahoo! Finance’. N.p., 2015. Web. 16 Apr. 2015.s
