Morningstar’s take on home-improvement stocks: Lowe’s screens cheaper than Home Depot, strategist says

Home-improvement retailers are back in investors’ crosshairs as valuation gaps re-emerge between two sector leaders. Morningstar Research Services analyst Dave Sekera said one of the category’s biggest stocks, Lowe’s, looks “cheaper” relative to its estimated fair value when compared with Home Depot, which he discussed alongside it.

In the comparison cited by Yahoo Finance, Sekera’s framework emphasized that Lowe’s appeared discounted by roughly 15% versus fair value. In practical terms, that means Morningstar’s model-based estimate of what Lowe’s stock should be worth, given its assumptions, sat above the current trading level referenced in the post.

Sekera also argued that, beyond valuation, Lowe’s had stronger long-term prospects. The specific operational drivers supporting that view were not detailed in the post, but the point was framed as a combination of what the stock is worth today versus where the business could head over time.

The market-news discussion did not provide new company disclosures such as earnings revisions, guidance updates, or changes to store-level trends. Instead, it centered on the relative attractiveness of the two stocks under Morningstar’s valuation and outlook assumptions.

Home Depot and Lowe’s are both major U.S. home-improvement chains with overlapping customer bases, including do-it-yourself projects and contractor-related demand. In this kind of comparison, valuation often matters because the sector can move with housing turnover, interest-rate expectations, and confidence in repair and renovation spending.

For investors watching the group, a key nuance is that “fair value” in analysts’ notes is model-dependent. When Morningstar or similar firms conclude a stock is trading below or above fair value, the result can shift if assumptions about growth, margins, discount rates, or capital returns change, even without any immediate change in the retailer’s fundamentals.

Still, the post offered limited detail on what exactly drove Lowe’s “stronger long-term prospects.” It did not enumerate quantitative estimates, such as projected earnings growth, comparable-store sales trajectories, or margin forecasts, nor did it outline why Home Depot’s outlook was comparatively less favorable in the same framework.

What to watch next is whether either company reports results or issues commentary that would validate or challenge the assumptions behind the fair-value comparison. In the near term, traders may also look for broader indicates in housing data and consumer spending that tend to influence both chains in similar ways, even if their perceived positioning differs in analysts’ models.