Compare two well-known American consumer goods companies that have shown strength during multiple recessions. Which one is the better buy in today’s market?
Home Depot case study
nevertheless home depot (HD 1.32%) The stock is more than 25% below its all-time high from late 2021 and is recovering well from its fall 2022 low. Is home improvement’s recent performance reflected in the stock price? Let’s take a closer look.
The Atlanta, Georgia-based company reported revenue of $38.9 billion in the third quarter of 2022, up 5.6% year-over-year. Home Depot’s digital sales increased 10%, fueled by exclusive product offerings and faster delivery times. Same-store sales, or comp sales, were up 4.3% on the strength of the DIY market.
Despite increasing sales, Home Depot continues to face global supply chain challenges. Gross margin hit him 10 basis points in the third quarter, according to CFO Richard McPhail. This is “mainly due to investment in the supply chain.” Nonetheless, Home Depot expects it to reaffirm its full-year 2022 guidance and end 2022 as expected.
On last quarter’s earnings call, McPhail asserted that long-term demand remains strong, thanks to Home Depot’s loyal customer base. The company expects current challenges to continue this year, although easing has also been observed in certain sectors such as timber.
Walmart case study
After hitting a high near $148 earlier this month, walmart (WMT 1.23%) The stock has fallen about 5% to its current $140 level. Investors want to know if stocks can recover from recent declines and, more importantly, if they can reach new heights.
The discount retail giant posted sales growth across all segments last quarter, raising its full-year guidance by 1% as a result. Total revenue in Q3 2022 exceeded $150 billion, including Walmart US, Walmart International and Sam’s Club.
Digital sales also supported Walmart in the third quarter. 46% year-over-year growth in online commerce. In his first three quarters of 2022, his 13% of Walmart sales started “digitally,” while online sales increased by 16% in the second and third quarters alone.
But while Walmart’s sales grew, its profit margins fell sharply. The Bentonville, Arkansas-based company reported a loss of $1.8 billion in the third quarter, compared with his $3.1 billion gain last year, largely due to inflation and unfavorable exchange rates. Did. Price reductions also hit profitability last quarter, reducing gross margin by 89 basis points.
With improvements planned to navigate the current environment, such as better vendor distribution agreements to cut overhead costs, Walmart has raised its full-year 2022 guidance to 5.5% from 4.5% during the pandemic. buoyed by a new wave of high-income shoppers accumulating in the US, CFO John David Rainey said Walmart is “well prepared to continue gaining market share” in the current consumer environment. I feel.
Which Stocks Should I Buy?
To determine if Home Depot or Walmart is a good place to buy now, let’s compare the price-to-book ratio and year-over-year growth projections.
|market capitalization||$337.56 billion||$391.82 billion|
|price to book ratio||260.07||5.42|
|1 year growth forecast||1.4%||7.4%|
Walmart is the winner today, with a much lower price-to-book ratio and a significantly better one-year outlook. But as long as current home improvement demand continues, Home Depot is well positioned for long-term growth.
Micah Angel has no positions in any of the mentioned stocks. The Motley Fool US headquarters invests in and recommends Home His Depot and Walmart. The Motley Fool’s U.S. headquarters has a disclosure policy.