Sometimes a fellow might take a liking to two different young ladies, but can only take one to the dance. Such is the predicament that investors find themselves in after both Home Depot (HD) and Lowe’s (LOW) reported earnings over the past two days.

Unlike the poor fellow who can only choose one, investors could choose to buy both HD stock and LOW stock.

But should they … especially when one has so clearly demonstrated superior business performance over the other across the years?

Home Depot & Lowe’s Earnings

Home Depot reported excellent earnings Tuesday of 73 cents per share — a nickel better than the year-ago period and better than analysts’ estimates by a pair of pennies. (Though it did come on revenues that fell 3% to $17.7 million, but that was affected by a week-shorter quarter.) Also pleasing Wall Street was a 21% dividend hike to 47 cents per share. All of that news worked in concert to send HD stock up 4%. LOW benefited too, climbing about 2% yesterday.

Then this morning, Lowe’s reported Q4 earnings of 31 cents per share to come in line with analysts’ estimates. Lowe’s revenues improved 5.6% year-over-year to $11.66 billion, which also matched expectations, but same-store sales growth of 3.9% was just a hair under the consensus estimate of 4%. Going forward, LOW expects EPS of $2.60 for the fiscal year, disappointing analysts, who expected $2.65. On the upside, Lowe’s said it will add another $5 billion to its share buyback program.

Despite the lower guidance, the Street appeared in a forgiving mood, and LOW stock headed another 4% higher Wednesday. (HD stock was up fractionally.)

Several analysts have recently agreed that while Lowe’s results are good, they just are not quite up to those of Home Depot.

• Analysts at Oppenheimer favor HD stock because of its superior comparable growth numbers over the last few quarters. In late 2013, they rated LOW stock at merely “perform,” while HD stock was rated “outperform.”
• Christopher Horvers, a JPMorgan analyst, recently called Home Depot “confident,” and said it has a “long runway ahead.” On the other hand, he was not as impressed with Lowe’s results.
• Matthew Fassier, a Goldman Sachs analyst, has called HD a company with “distinctively strong and straightforward numbers in a retail backdrop,” and is impressed with its same-store sales. Meanwhile, he sees Lowe’s same store sales as “solid,” but doubted Lowe’s ability to achieve consistent performance vs. Home Depot and the Street estimates.

HD Stock vs. LOW Stock

Both HD stock and LOW are breaking out above recent resistance levels on these earnings reports, and are now just a few dollars below their recent highs. Both appear to want to retest those levels fairly soon.

So with both companies performing well, how do investors know which of the two will do better for their portfolios?

Here are the numbers that I think tell the most straightforward story.

• HD stock sports a forward price-to-earnings ratio of 15.72, has a return on equity of 33.76% and yields 2% in dividends. Moreover, Home Depot has increased its dividend every year since 1997.
• LOW stock also has a a forward P/E of 18, but the RoE is smaller at 18.76% and the dividend yield, while also increasing each year since 1997, currently sits at only 1.5%.
• HD has approximately 7.5 times debt to cash on hand, while LOW has 9 times debt to cash.

Clearly the key statistics favor Home Depot over Lowe’s, too.

Bottom Line

Home Depot’s ability to more consistently beat the Street, its fundamentals and its greater dividend all make HD stock a more attractive holding than LOW.

However, one thing to consider with both stocks: If you’re going to invest, you have to keep an eye on the housing market, which recently has been showing signs of weakening. Home improvement retailers are extremely sensitive to the performance of the real estate market, and both stocks were cut in half between 2007 and 2009 when the housing market collapsed.

But barring any collapse in housing, both stocks should continue to do well going forward.

And like the fellow who needs to choose his dance partner, investors should see Home Depot as the better of the two, and consider going steady with HD.

As of this writing, Ethan Roberts did not hold a position in any of the aforementioned securities.