It's no secret that Home Depot's (HD -1.29%) prospects are guided by home improvement spending, which is led by the housing market. As such, many investors buy into the stock to play an improving housing market in an environment of, hopefully, lower interest rates. Still, if you are making that assumption, there are plenty of other ways to play the theme, and they offer potentially more upside. Here's a look at why Whirlpool (WHR 1.03%), Stanley Black & Decker (SWK 4.54%), and Owens Corning (OC -0.70%) might be better buys.

Valuations still matter

Home Depot is a fine and worthy stock and trades on a 2.4% dividend yield, which provides some helpful income. It also has an excellent position in its end markets, and the $18.25 billion acquisition of SRS Distribution makes sense as it expands its presence with the residential professional customer. It trades on a price-to-earnings (PE) ratio of 26 times trailing earnings and 23.5 times estimated earnings in 2027.

Image source: Getty Images.

As such, it's fair to say that if you think the stock has significant upside potential from here, you are probably pricing in some upside surprise to earnings from an improving housing market.

The assumption of an improving housing market is fair enough, but the following housing-related stocks seem like a better value. Before going into more detail, note that the analyst consensus is for Whirlpool and Owens Corning's earnings to decline in 2025 (which is why their PE ratios are shown rising) before returning to growth in 2026. Meanwhile, Stanley Black & Decker's expected growth primarily comes down to its cost-cutting measures -- management's base case scenario calls for sales in 2025 to be flat on 2024.

That said, Wall Street estimates for Home Depot aren't much better. The consensus calls for 1% earnings per share (EPS) growth in 2025, followed by 10% in 2026.

Data source: Yahoo Finance. *Wall Street analyst consensus.

Whirlpool: More risk, more reward

The market is offering more reward for these three stocks to compensate for more risk, and there's little doubt they carry significant risk.

Starting with Whirlpool, a company with a market cap of $5.6 billion and $6.6 billion in net debt, of which $1.85 billion is maturing in 2025. Management plans to pay down $700 million of that debt this year and refinance $1.1 billion to $1.2 billion of the remaining maturing debt while maintaining its dividend, costing $384 million.

The plan is backed by its expectation to generate $500 million to $600 million in free cash in 2025, while potentially receiving $550 million to $600 million from reducing its stake in Whirlpool India from 51% to 20%.

The plan could run into trouble if end market conditions deteriorate in 2025, and Whirlpool's launch of more than 100 new products (including a complete product redesign of KitchenAid) fails to generate the sales and profit margin management expect.

Image source: Getty Images.

Stanley Black & Decker is on the right track

While Whirlpool failed to meet its initial 2024 guidance for sales, margin, and cash flow, Stanley Black & Decker met all of its key guidance metrics last year, as the company builds on its recovery plan to cut costs and expand profit margin while reorganizing its supply chain, sourcing, and manufacturing facilities.

The plan is working, but there are a couple of concerns. The first is its still historically high inventory-to-sales ratio, as weak sales make it harder to reduce inventory. There's also a concern about the potential for tariff actions to add to its cost base as they did the last time President Donald Trump was in office.

Fundamental Chart data by YCharts.

Owens Corning doubles down on housing

Whereas Whirlpool appears to be reacting to events rather than leading them, and Stanley Black & Decker is fundamentally restructuring, Owens Corning is definitely leading proactively. The roofing, insulation, and composites company doubled down on the residential housing market in North America with its $3.9 billion acquisition of doors company Masonite last year.

The deal adds a complementary product to its sales operation and allows management to generate cost synergies as part of the deal.

While the full benefit of the deal won't shine through until the residential repair and remodeling and housing starts activity picks up, Owens Corning is a company with adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) margin of 25% and one that generated $1.2 billion in free cash flow in a weak market last year.

That solidity protects the downside from potential housing weakness while offering investors a significant upside if the housing market recovers.

Image source: Getty Images.

Stocks to buy?

Whirlpool, Stanley Black & Decker, and Owens Corning all look like better values than Home Depot right now. Whirlpool is a stock for more speculative investors, meaning those who like high risk/high reward, while Stanley Black & Decker is on the right track, but still has some unknowns around tariffs and inventory reduction. Of the four stocks discussed here, Owens Corning looks the best placed on a risk/reward basis, at least for investors looking to play an eventual housing market recovery.