Should You Forget Home Depot and Buy These 3 Housing-Related Stocks Instead?

Core Viewpoint - Home Depot's prospects are closely tied to home improvement spending and the housing market, leading investors to consider alternative stocks like Whirlpool, Stanley Black & Decker, and Owens Corning for potentially better returns [1]. Valuation and Financial Metrics - Home Depot has a dividend yield of 2.4% and a price-to-earnings (PE) ratio of 26 times trailing earnings and 23.5 times estimated earnings in 2027 [2]. - Analyst consensus predicts 1% EPS growth for Home Depot in 2025, followed by 10% in 2026 [5]. - PE ratios for 2024, 2025, and 2026 for Whirlpool, Stanley Black & Decker, and Owens Corning are as follows: - Whirlpool: 8.1, 10.2, 8.7 [6] - Stanley Black & Decker: 19.3, 16, 12.8 [6] - Owens Corning: 9.3, 10.1, 9.1 [6] Company-Specific Insights - Whirlpool: - Market cap of $5.6 billion with$6.6 billion in net debt, planning to pay down $700 million of debt this year [7]. - Expected to generate$500 million to 600 million in free cash in 2025, with potential cash from reducing its stake in Whirlpool India [8]. - **Stanley Black & Decker**: - Successfully met key guidance metrics last year, focusing on cost-cutting and supply chain reorganization [9]. - Concerns include a high inventory-to-sales ratio and potential tariff impacts [10]. - **Owens Corning**: - Recently acquired Masonite for 3.9 billion, enhancing its position in the residential housing market [11]. - Generated $1.2 billion in free cash flow in a weak market, with an adjusted EBITDA margin of 25% [12][13]. Investment Outlook - Whirlpool is seen as a high-risk, high-reward investment [14]. - Stanley Black & Decker is on a recovery path but faces uncertainties regarding tariffs and inventory [14]. - Owens Corning is viewed as the best positioned for risk/reward, especially for those anticipating a housing market recovery [14].