Fortune magazine has ranked the Home Depot as America's Most Admired Specialty Retailer for eight consecutive years. In March 2002 the same magazine placed Home Depot as number six on its "Top Ten" ranking of industry. This judgment was based on innovation, financial soundness, employee talent, use of corporate assets, long-term investment value, social responsibility, quality of management and qu

The ROCE is actually composed of three components, the ROA, Common Earnings leverage, and Financial Structure Leverage. The Financial Structure leverage is a crucial component in trying to see how much of the common shareholder’s capital is used to finance assets. If the cost of financing is too high, leverage can harm shareholders. Home Depot has ROCE of 1.46 and Lowe’s has ROCE of 1.03. In this aspect, Home Depot is a riskier company because if for some reason the debt cannot be repaid, it is coming out of the pockets of shareholders. As long as the earnings are consistently high, as shown by the previous profitability ratios, a little leverage is not bad.

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