Home Depot vs. Floor & Decor: Which Stock Holds More Promise Now?

Core Insights - Home Depot is the dominant player in the home improvement retail space with a market capitalization of approximately $384.8 billion, while Floor & Decor is a specialty retailer with a market cap of about $7.7 billion, focusing on hard-surface flooring and related accessories [1][2] Company Overview - Home Depot operates over 2,300 stores across the U.S., Canada, and Mexico, serving both DIY customers and professional contractors [1] - Floor & Decor has more than 260 warehouse-format stores in the U.S., targeting homeowners, designers, and professional installers with competitive pricing [2] Market Conditions - Both companies are facing softer housing activity and cautious discretionary spending, impacting their growth prospects [3] - Home Depot's comparable sales increased by only 0.2% in Q3 of fiscal 2025, down from 1% growth in the previous quarter, indicating muted demand [7] Home Depot's Strategy - Home Depot's growth strategy includes expanding its Pro ecosystem and introducing AI-powered tools to enhance project planning for professional customers [4][5] - The company aims to capture a larger share of Pro spending across various construction categories [4] Floor & Decor's Strategy - Floor & Decor is expanding its footprint with plans to open about 20 new stores annually, aiming for 500 locations in the long term [11] - The company has improved its unit economics, reducing initial build-out costs by approximately $1.5 million per store compared to previous classes [12] Financial Performance - Home Depot's current financial-year sales are estimated to grow by 3.2%, with a decline in earnings per share (EPS) by 4.9% [16] - Floor & Decor's current financial-year sales are projected to grow by 5.3%, with EPS growth of 3.2% [19] Stock Performance - Home Depot shares have increased by 11.3% over the past month, while Floor & Decor shares have risen by 14.6% [22] Valuation - Home Depot's forward P/E ratio is 25.64, higher than its one-year median of 23.83, while Floor & Decor's forward P/E ratio is 32.45, below its median of 37.00 [23] Investment Outlook - Home Depot's near-term outlook is constrained by muted housing activity, while Floor & Decor is gaining market share and expanding its addressable opportunity, making it a more promising investment currently [24]