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Both The Home Depot NYSE: HD and Lowe's Companies NYSE: LOW have benefited from dramatic improvements in the housing market over the past decade. After having to deal with homeowners who were essentially trapped in their current homes as well as reluctance among lenders to make mortgage loans, Home Depot and Lowe's have now been able to tap into new optimism among homeowners and serve both do-it-yourselfers and contractor professionals doing home-improvement work.

Yet over the past year, impressive gains in their stock prices have slowed down, and some now wonder whether rising rates will hurt housing and cause a larger pullback for the two companies.

Let's compare Home Depot and Lowe's on several important measures to see which one looks like the better buy right now. Lowe's and Home Depot have both seen a small portion of their longer-term gains disappear over the past 12 months. Turning to valuation, simple earnings-based methods of comparing the two stocks lead to mixed results. If you focus solely on what the two companies have brought in over the past 12 months, Home Depot's earnings are a bit stronger compared to its share price, and that has produced a trailing earnings multiple of Lowe's comes in a bit higher at 26 times trailing earnings.

However, if you look at near-term predictions of what the two companies are likely to earn in the future, the valuation picture reverses. Lowe's has a forward earnings multiple of less than 16, compared to about 18 times forward earnings for Home Depot. Lowe's and Home Depot therefore look relatively similar on a valuation basis as long as you believe the story that those who follow the stock are telling about their near-term future prospects.

At first glance, both Home Depot and Lowe's look like fairly ordinary stocks from a dividend standpoint.

Home Depot Versus Lowe's: Both Going Higher? - Home Depot, Inc. (NYSE:HD) | Seeking Alpha

They both have yields near the market's overall average, with Home Depot's dividend yield of 2. Dividend growth has also been a priority for both Lowe's and Home Depot. Lowe's is a Dividend Aristocrat, boasting a year history of boosting its dividend every single year.

Home Depot can't match that track record, as it chose not to increase its payout during the immediate aftermath of the financial crisis. Again, both home-improvement retail giants look similar when it comes to dividends. Both Home Depot and Lowe's have posted solid earnings recently. In its most recent quarter, Home Depot posted comparable-store sales growth of 5.

At Lowe's, recent performance has lagged somewhat, but the company remains optimistic about its future. Operating margin remained in the high-single-digit percentages at Lowe's, badly lagging Home Depot's low-to-mid-teens figure. One area where Lowe's is trying to catch up is in its store network, where continuing expansion requires some additional commitment to capital expenditures.

Home Depot has traditionally outpaced Lowe's in fundamental business performance, and with few differences in dividend or valuation, Home Depot remains the more attractive stock right now. With some doubts about the sustainability of housing's boom, it makes sense to stick with the tried-and-true pick in investing in this industry.

Home Depot Vs. Lowe's: Battle Of The Home Improvement Retailers - Home Depot, Inc. (NYSE:HD) | Seeking Alpha

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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Stock Showdown: Home Depot Stock vs. Lowe’s Stock | InvestorPlace

Dan Caplinger has been a contract writer for the Motley Fool since As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.

With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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