Puts Popular on Mediocre Home Improvement Stock

LOW has dropped over 10% in price since the start of the year

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Lowe's Companies, Inc. (NYSE: LOW) is a home improvement company that serves customers in the United States and Canada. On March 7, Lowe's announced a five-year, $100 million investment into a new community impact program called Lowe's Hometowns. According to the company, each year from 2022 through 2026, Lowe's Hometowns will complete nearly 1,800 community impact projects, including 100 signature projects chosen from consumer nominations, and nearly 1,700 projects selected through Lowe's stores across the country. This afternoon, LOW was last seen trading up 2.9% at $228.77.

Lowe’s stock has increased 40% year-over-year has added 38% since hitting a 52-week low of $159.29 last March. However, shares of LOW have decreased in price 1`% year-to-date and Lowe's stock is currently down 13% after reaching an all-time high of $263.31 in December.

Moreover, Lowe's Companies offers a dividend yield of 1.44% with a forward dividend of $3.20. LOW also provides a fair valuation from a fundamental point of view. Lowe's stock trades at forward price-earnings ratio of 17.61 and a price-sales ratio of 1.61.

Seemingly, the only downside to Lowe's business can be found on the balance sheet which holds $29.38 billion in total debt and just $1.4 billion in cash. Still, Lowe's stock's fundamentals are very well-rounded and provide a high sense of security. Overall, LOW will likely be a winner in the long-term, regardless of short-term volatility, as long as the company continues to improve on profitability.

Meanwhile, in the options pits traders are leaning toward puts. Should this pessimism begin to unwind, it could send the equity higher. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LOW's 10-day put/call volume ratio of 1.69 stands higher than 93% of readings from the past year. This indicates puts have been picked up at a quicker-than-usual clip in the last two weeks.

Lastly, the stock's Schaeffer's Volatility Scorecard (SVS) sits at a 75 out of 100. This means the security has exceeded option traders' volatility expectations during the past calendar year.

 

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