Lowe’s Companies, Inc. (LOW): Never Stop Improving, Never Stop Investing

Threats:

1). Competition: The industries Lowe’s operates in are extremely competitive, and the battle to offer the best product for the least amount of money can lead to margin contraction

2). Rising Input Prices: The prices of the products Lowe’s sells at its stores are consistently fluctuating, and any rising input prices could leave the company with the decision to raise prices on their customers or swallow the pain in their margins

Competition:

Major publicly traded competitors of Lowe’s include The Home Depot, Inc. (NYSE:HD), Lumber Liquidators Holdings Inc (NYSE:LL) , and Amazon.com, Inc. (NASDAQ:AMZN) . All of these companies operate in the same industries as Lowe’s and compete directly with the company. Both Home Depot and Lumber Liquidators offer similar to identical products at physical locations, while Amazon.com offers some these products on their website. Home Depot is valued at $100.63 billion, pays out a dividend yielding 1.72%, and carries a price to earnings ratio of 23.82. Lumber Liquidators is valued at $1.60 billion, does not pay out a dividend, and carries a price to earnings ratio of 39.71. Amazon is valued at $120.31 billion, does not pay out a dividend, and carries a negative price to earnings ratio.

The Foolish Bottom Line:

Financially, Lowe’s is a relatively solid company. The company possesses good revenue growth, a sizable dividend, and a strong correlation to the accelerating housing market. However, the company’s slim margin and relatively large debt load is troubling. Lowe’s future is filled to the brim with potential opportunities that could produce growth, but the company faces several threats. All in all, on any pullback from these all-time highs by the stock, Lowe’s is a great addition to any long-term portfolio, and should benefit significantly in the short-term due to the growth in the housing market.

The article Never Stop Improving, Never Stop Investing originally appeared on Fool.com and is written by Ryan Guenette.

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