Question

You are an analyst fir a mutual fund that wanrs to include a home inprovement store in its portfolio. Given that Home Depot and Lowes are the dominant olayers in the industry, which firm would you recommend buying? Explain

C D F N M N O P Q R 5 T 1 LOWE's HOME DEPOT 2010-01 2001-01 2012-01 2011-01 2014-01 2005-2006-01 2017-01 220 48.835 50,208 50 52 54 56.223 52 2010-2011-01 2012-01 2013-08 2014-01 2015-2016-01 2017-01 3.112 3.560 277 73 65 7 BS . Revenue Grossa Operating income USO MI Operating Margins 9 Dividend Payouts 10 Shares 11 Book Value Per Shwe USD 12 Operating Cash Flow USO MI 13 Cap Spending USD M. 14 Free Cash Flow USO MI 15 Working Capital USI 17 My Hoa - Putin 19 Revue 20 COGS 21 Gross 22 SGBA 23 Operating 24 LT Megin 373 120 1454 456 1.400 1.2 1331 13 132 1205 1228 3116 9.21 725 3.252 3,742 431 4320 4,786 5,807 -1.79 1323 -1.829 1211 48-18-300 2.255 2523 2.500 2.5517 4. 2.377 248 2,00 2,070 1420 752 20 MS 16 Goergen USOME 45 *166 10.480 11,714 13:42 73 124 126 133 142 30 14 95 40.5 419 431 1.882 1.6 1.870 1811 1412 150 114 Booker USO 114 115 116 11.06 7:07 6.09 46 Opening Crow SOM 5.125 4568 697 9,37 278 Capg -2.00 -1.22 -1.312 - 42 -2.50 -2,621 4.1993489 5.430 5.40 6.299.00 7,890.32 CUOI 3.397 3.397 5.6 5.810 4.50 4.035 4,467 3.51 sayos 2010 2013-01 2012-01 2013-02-01 2015-01 2016-08 2017-03 100 4.33 673 655 654 65.35 5.7 2403 23:33 227 2208 20:45 2010-01 2001-01 2012-01 2011-01 2014-08 2015-08 2006-09 2017-03 657 6543 623 558 6545 148 490 349479 H2 2430 240 6.50 9.56 20 119 12:45 C D E F G N O P Q R S T HOME DEPOT τοττε τοτταε τατταε ταττοε τοτοε τοττοε τοτταε το στα: 2010-2011 2012 2013-08 2004-01 2015-01 2015-01 2017-01 LOWES 26 Key Ratios Growth 28 Revenue 29 Yes Are 30 Sverre Key Ratio - Cashow Cash Flow Ratios 4 Capas asof Sales Free Cash Pow/Sales 504 572 205491 31 6 27 5429 5.312.45 156 0932.065555533 2010-01 2013-01 2012 2013 2014 2015 2016 2017 5.055.72 6.00 2010-01 2018-01 2012 2018-02-01 2015-01 2018-01 2017-01 144 145 176 17 2010-01 2013-08 2012-08 2018-0204-01 2015-2016-3 2007-03 PRE 30 Balance Sheets 39 Cash & Shon-Term Investments 40 Accounts Receivable 41 42 Totalent Assets 43 Net 44 Total Assets 15 Total Current les 46 Long Det 47 Total 48 Total Stockholders Equity 49 Total Liabilities & Equity wo Base Se 2015 01 2011-01 2012-05 2018-02-01 2015-01 2016-01 2017-01 2.2 273.00 3.7 2493 2.4 2.6 26.07 2729 27.73 27.75 29.21 S&S 57 568 5215 100 300 100 23.14 20 21 216 217 218 36 52.54 $2.255.0 229 249 25.33 22 68.17 65.55 56 57 56 57 300 100 100 100 236 37 33 33.56 13.72 1942 BOR 38 50% 758 753 1827 0312 344 ** 100 300 B C D E F H LOWE quidity Financial Current Quick Ratio 2000-01 2011-01 2002-01 2015-01 2014-01 2005-2006 01 2017-01 103 1 . DO 2.56 275 M N O P Q R 5 T HOME DEPOT Liqca meth 2000-01 2011-2012 2003-01 2010-01 2015-04 2015-01 2017-01 142 195 134 1.25 0.33 Debut 536 Key Ratios-iciency Rates 2000-01 2011-01 2012-01 2013-01 2014-01 2015- 2005-01 2011-01 99.56 95.51 92.62 3.22 92.59 89.78 06 15.02 Days in Payables Period Cash Conversion de Receivables Tumover Inntry Turner Faxed Assets Tumover 2000-01 2011-2012 01 2013-01 2014-01 2015-04 2015-01 2017-01 16.99 349 2.387.77.25 30.05 9006 3075 51453510 46.7 9919 4342 4. 4 511 16 221 3.743019 2.09 239 220 1.0414 1 2000-01 2011-01 2012-01 2013-01 2014-01 2015- 2005-01 2017-01 36. 37.73 3.2 39.55 39.25 Taste 2000- 2011- 2012-01 2013-01 2014-08 2015-08 2015-01 2017-01 36.338.00 353 19 1771 SEOS 2.07 174 19 175 1.90 eum an quity Asset Tumover Rerum on Assets Financial regel 13 Resum on invested Capital 19:54 34944 25 221 1062120 150 5.47 5.92 2:56 146 6.00 186 over here Ron 6.99 275 8.00 173 225 574 13.26 3625 895 892 999 30 871 899

Answer 1

To solve this questions we need to focus more on the ratios that are given in the last section of the problem.

Taking into consideration the following ratios the evaluation of the two entities

1.Financial leverage

2.Debt/Equity

3.Return of equity

4.Interest coverage ratio.

Let's compare the following companies on the above basis.

1.Financial leverage: The Financial leverage of company LOWEs is less than HOME DEPOT this signifies that the company has lesser debt than the other company. This signifies that the company is using the debt more prominently.

2.Debt/Equity : The debt equity ratio of Lowe is lesser that Home Depot. This shows that the Lowe is equity oriented company giving more returns to the equity.

3.Return on Equity : The return on equity is more in Home Depot than Lowe, its is doing better than its peer Lowe.

4.Interest coverage ratio : Interest coverage is more in Lowe than Home Depot, this shows that Lowe is more efficently awarding its Debt holders than Home Depot.

On the basis above ratios, it can be concluded that Home Depot can get a buy recommendation.

Conculsion: Home Depot shares should be bought.