The Home Depot (NYSE:HD) and Costco Wholesale (NASDAQ:COST) are both large-cap retail/wholesale companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, institutional ownership, risk, analyst recommendations, profitability, earnings and valuation.
Insider & Institutional Ownership
68.7% of The Home Depot shares are owned by institutional investors. Comparatively, 67.2% of Costco Wholesale shares are owned by institutional investors. 0.3% of The Home Depot shares are owned by insiders. Comparatively, 0.2% of Costco Wholesale shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
Earnings & Valuation
This table compares The Home Depot and Costco Wholesale's revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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The Home Depot | $110.23 billion | 2.77 | $11.24 billion | $10.25 | 27.71 |
Costco Wholesale | $166.76 billion | 0.96 | $4.00 billion | $8.85 | 40.94 |
The Home Depot has higher earnings, but lower revenue than Costco Wholesale. The Home Depot is trading at a lower price-to-earnings ratio than Costco Wholesale, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
The Home Depot has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500. Comparatively, Costco Wholesale has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500.
Analyst Ratings
This is a breakdown of current ratings for The Home Depot and Costco Wholesale, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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The Home Depot | 0 | 5 | 23 | 1 | 2.86 |
Costco Wholesale | 0 | 11 | 20 | 0 | 2.65 |
The Home Depot presently has a consensus price target of $294.2903, suggesting a potential upside of 3.62%. Costco Wholesale has a consensus price target of $386.64, suggesting a potential upside of 6.72%. Given Costco Wholesale's higher possible upside, analysts plainly believe Costco Wholesale is more favorable than The Home Depot.
Profitability
This table compares The Home Depot and Costco Wholesale's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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The Home Depot | 9.94% | -910.85% | 20.80% |
Costco Wholesale | 2.50% | 24.50% | 7.73% |
Dividends
The Home Depot pays an annual dividend of $6.00 per share and has a dividend yield of 2.1%. Costco Wholesale pays an annual dividend of $2.80 per share and has a dividend yield of 0.8%. The Home Depot pays out 58.5% of its earnings in the form of a dividend. Costco Wholesale pays out 31.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Costco Wholesale has increased its dividend for 16 consecutive years.
Summary
The Home Depot beats Costco Wholesale on 12 of the 18 factors compared between the two stocks.