A strong housing market in the US, as evidenced by higher home prices and a greater number of people buying homes, has lifted stocks in a variety of industries. While most investors would look to the traditional housing stocks as a means to profit from this development, many seem to overlook an industry that naturally stands to benefit, namely home appliances. As one of the world's top appliance makers, Whirlpool (NYSE:WHR) looks like an excellent opportunity to get in on the housing recovery, trading at a discount to its main competitor.

The Basics

Whirlpool is a well-known name in appliances, producing durable consumer goods such as washing machines, refrigerators, freezers, dishwashers and mixers. Its brands include names such as MayTag, KitchenAid and Privileg. The company has a strong global presence, as well as a sizable lead over the competition in terms of market share. The stock has a market cap of around $10.6 billion, and is up a whopping 81% in the last twelve months. It yields about 1.9% at a very low payout ratio of 26%.

Investment Thesis

As mentioned in the introduction, Whirlpool stands to benefit from the surging housing market in the United States. Home sales have increased some 15% compared to a year ago, whereas home prices are up between 7% and 12%. With more people buying new homes, there is naturally higher demand for new home appliances, as this is something people frequently invest in when moving into a new residence.

For Whirlpool, this has translated into some solid earnings beats over the last few quarters. Analysts are expecting a 3-5 year growth rate of 13.2%, which is well above the 5.4% industry average. While the latest report missed estimates by around 2%, Q2 2013 earnings showed strong growth across the board, with GAAP EPS up an impressive 71%, prompting the company to also raise its full-year guidance.

Whereas the company had previously projected growth of between 2% and 3% in North America, it now expects between 6% and 8%. With a strong line of brands, and plenty of cash to fuel further product innovation, the company expects this strong growth to continue. The company now expects full-year EPS of $10.05-$10.55, versus a previous $9.80-$10.30. Moreover, it expects continued margin expansion throughout the year, fueled in part by cost-cutting initiatives and pricing.

Another boon for the company going forward is the recently-announced partnership with SodaStream (NASDAQ:SODA), a fast-growing company that allows you to make your own carbonated drinks at home. Under this collaboration, the KitchenAid brand will be releasing a home carbonation system in the fourth quarter of the year, which is expected to greatly benefit Whirlpool as well as SodaStream by bundling the customer bases of both. In any case, SodaStream's CEO is very pleased with the deal, saying it should allow the category to "reach an even broader global audience."

Another large appliance maker that stands to benefit from the housing recovery in the US is the Swedish Electrolux (NASDAQOTH:ELUXY). The company saw the North American core appliances market up by 9% last quarter, and as it continues to gain some market share in the region, and expects this strong growth to continue throughout the year, boosted in part by several new product launches.

Latin America was also showing some very solid double-digit growth, as government home appliance incentives in Brazil led to higher volumes. Like Whirlpool, Electrolux expects a slowdown in Europe for the year. Yet, the company's overall growth doesn't seem worth the premium at which the stock is trading.

Valuations and Metrics

Whirlpool looks like its valued attractively at the moment, with a P/E of 16.62 times trailing earnings and a forward P/E of only 11.04. Major competitor Electrolux trades at 22.39 times trailing earnings and a forward P/E of 15.03. Meanwhile, Whirlpool has a very low PEG ratio of 0.45, and a decent return on equity just short of 15%. Finally, its debt load is manageable, with a total debt to equity ratio of 52.62.

The Bottom Line

The future looks bright for Whirlpool, as continued strength in the US housing market has led to increased sales. What's more, the company is expecting this strong performance to keep up going forward, as it continues innovating its product line and trimming costs. Trading at a discount to its closest competitor, despite a considerably stronger market position and a recently-announced partnership with SodaStream, the stock looks like it could go even higher. 

Daniel James has no position in any stocks mentioned. The Motley Fool recommends SodaStream. The Motley Fool owns shares of SodaStream. 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. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!