LOW is undervalued and a buying opportunity, preferred over Home Depot: fair value $230 vs $186 implies about 24% upside. Despite flat-to-low-single-digit 2026 revenue forecasts, operating margin falling from 15.5% to 11.3%, and difficult next one to four quarters, ROIC is 20%, above WACC.

However, I think it's a good time to look into some home improvement retailers, specifically Home Depot and Lowe's.

To put things in perspective, Home Depot and Lowe's revenues increased at a compound annual growth rate of about 8% during the decade prior to 2020, i.e., between 2009 and 2019.

In 2020 and 2021, revenues increased by about 30% in some quarters and for several consecutive quarters. Thus, their growth rates tripled for several consecutive quarters.

Revenue forecasts for both Home Depot and Lowe's are relatively flat for 2026. They are forecasting either no growth at all or low single-digit growth.

Similarly, their profit margins have been declining since the economy reopened. You mentioned that revenue growth is flat or even moving sideways, but their costs are not. It does not move sideways.

Trade barriers have increased input costs, and the high wages of many of their workers have increased operating expenses in addition to the higher cost of goods. Therefore, these two forces combined with stable revenues led to a decrease in their profit margins.

At one point, Luz's operating profit margin reached 15.5%, and is now declining to 11.3%. The next one to four quarters are also likely to be a difficult period.

Returns on invested capital were similarly booming in the years leading up to and during the pandemic, but have since trended downward. However, at 20% for Lowe's and 18.5% for Home Depot, these figures remain above their weighted average cost of capital.

So, both companies are still adding value to shareholders for every dollar reinvested in the company.

These challenges are no secret to investors, and neither Home Depot nor Lowe's has been favored by Wall Street or individual investors. Home Depot shares are trading near their all-time low with a forward P/E ratio of 18, and Lowe's shares are also near their all-time low with a forward P/E ratio of 14.3.

The type of products that Home Depot and Luz sell are difficult for any purely online retailer to compete with, isn't it? It would be difficult for Amazon to deliver a 2x4 wooden board or a 20x30 plywood board to your home, wouldn't it?

So, these are heavy materials, and materials that you may sometimes need urgently. Therefore, even next-day delivery will not be sufficient. Often, it is professionals who go to these stores to buy materials they need for a project, after discovering that they do not have them or have run out at that moment.

At the same time, the fair value of "Loz" was calculated at $230. The current market price is $186. Therefore, I calculated an upside probability of approximately 24% for "Loz" stock.

In general, I can say that "Loz" stock is undervalued.

I am impressed with both companies at current market prices. I have rated both as buying opportunities. However, if I had to choose just one, "Loz" would have the advantage here, and I would choose "Loz" as a better buying opportunity at current market prices.