Home improvement companies are having a moment.
All around the country people remain locked up at home, staring at the same four walls day in and day out because of the pandemic. The desire to improve one's home, the need for something new and the sheer monotony of remaining indoors all day have led to a surge of interest among consumers in home improvement projects. Do-it-yourself projects and renovations are on the rise around the country. Companies that can supply customers with everything they need to spruce up their homes are enjoying impressive gains as a result. In fact, all six of the companies on this list have enjoyed tremendous growth over the last few months -- and the long-term tailwind of an improving housing market gives all six of these home improvement stocks an excellent opportunity to enjoy impressive returns well into the future.
Home Depot (ticker: HD)
Thanks to the huge number of homeowners looking to do a little renovating, Home Depot's comparable store sales shot up 23.4% year over year in the second quarter. In fact, the second quarter was a blowout across the board; the company reported a 100% increase in digital sales, as well as a 10.1% increase in the average customer ticket. Online or offline, people are turning to Home Depot for their renovation needs more than ever, and buying more per transaction -- that's a winning combination for Home Depot and its shareholders. While Home Depot's forward price-earnings ratio sits at a relatively high 24.7, investors shouldn't fret, given the company's recent performance and future prospects. A 2.13% dividend yield only makes an investment in Home Depot that much sweeter.
Unlike many companies on the market, Lowe's has had an excellent 2020. Shares have risen nearly 40% year to date, hitting an all-time high back in August after the company announced impressive second-quarter earnings. That report included a 30.1% year-over-year increase in sales, as well as a whopping 75% increase in diluted earnings per share. Other highlights included a 135% increase in Lowes.com sales and an 11.6% increase in the average comparable ticket size. The one-two punch of more online purchases coupled with fuller shopping carts has propelled Lowe's to new heights. A dividend yield of 1.47% sweetens the deal for investors, who should be excited by what the future will bring for this fast-growing home improvement titan.
While brick-and-mortar retailers around the world have been forced to shut down and absorb the losses, online retailers like Wayfair have never been more profitable. Wayfair provides customers with all the home furnishings they'll ever need, and customers have flocked to the site in record numbers -- in fact, in the second quarter, Wayfair saw nearly 5 million net new customers join its website, which is more than the previous four quarters combined. All of these new customers contributed to a 83.7% year-over-year increase in revenue last quarter, which translated to non-GAAP (generally accepted accounting principles) EPS of $3.13. That's well above the $1.35 per share loss Wayfair posted in the second quarter of 2019. The company's meteoric rise has some analysts skeptical it can sustain these gains going forward, but Wayfair has clearly positioned itself well for the future.
Speaking of skepticism, Overstock's recent gains have raised plenty of eyebrows around the market. Shares of the online retailer are up an incredible 900% this year, and some analysts believe that Overstock's rise is far from over. It's all thanks to the company's new CEO Jonathan Johnson, who took the job in September of last year and began to shift the company's focus toward home furnishings -- a decision that now seems particularly well-timed in light of the pandemic. Overstock reaped the rewards in the second quarter, when the company reported a 205% year-over-year increase in new retail customers, who contributed to a blistering 109% increase in net revenue. Customers' current focus on home improvement will bolster Overstock's business in the near term, and in the long run, gains today should lead to continued profitability tomorrow.
Sherwin-Williams Co. (SHW)
A fresh coat of paint can turn a house into a home, as Sherwin-Williams well knows -- yet the venerable paint producer hasn't profited from higher rates of home renovation across the country. True, while DIY projects pushed revenue in Sherwin Williams' consumer brands group up 21.8% year over year last quarter, those gains were countered by plummeting demand in professional markets; sales in the performance coatings group dropped 16.5%, while the Americas group saw sales decline by 8.4%. The result was a 5.6% decline in revenue this quarter compared to the prior year, but that hasn't stopped Sherwin-Williams stock from climbing 25% in 2020 as of mid-September. Recovering professional demand thanks to a surging housing market coupled with store reopenings in its Americas group promises a brighter future for this paint company.
Pool Corp. (POOL)
As the urban exodus into the suburbs continues, many of these homeowners want to enjoy the outdoors from the comfort of their backyards. So it should come as no surprise that Pool Corp., supplier and distributor of swimming pool equipment, has enjoyed a historic summer. Pool Corp. announced net sales of $1.28 billion in the second quarter, a company record and a 14% increase year over year, while diluted EPS increased 20% to $3.87, another record. All of this was thanks to a surge in demand for swimming pool equipment, as well as supplies for maintenance and repairs, as homeowners spruced up their outdoor spaces -- and as new homeowners arrive in the burbs, Pool Corp. has seen increased demand for pool building materials as well, indicating that long-term demand will sustain POOL's hot streak.
Six home improvement stocks to buy today:
-- Home Depot (HD)
-- Lowe's (LOW)
-- Wayfair (W)
-- Overstock.com (OSTK)
-- Sherwin-Williams Co. (SHW)
-- Pool Corp. (POOL)