Lowe's (LOW -0.47%) has been a fantastic stock to own, with its price rising by 133% over the past five years (as of May 16). The S&P 500, by comparison, generated a total return of 67% during that same time. But so far, in 2023, Lowe's has been underperforming the broader market, which is up 7%. 

With the business set to report fiscal 2023 first-quarter financials soon, is Lowe's stock a buy, sell, or hold right now? Let's consider the bullish and bearish arguments for this home-improvement giant to help come to a worthwhile conclusion. 

Reasons to buy 

An obvious reason to buy the stock is that Lowe's is making inroads into the lucrative professional segment, an area long dominated by Home Depot (HD -0.29%). In fact, under Marvin Ellison's leadership, a greater share of Lowe's sales (about 25%) is now derived from contractors, electricians, and the like. This is important for Lowe's because these customers tend to spend and visit more compared to DIYers, meaning that it can be a boon for profitability.

Home Depot generates about half its revenue from pros, and it has long posted better margins than Lowe's. As Lowe's continues making progress here, investors hope its net income can get a boost. 

Consequently, the business might be poised to grow earnings per share (EPS) at a healthy clip going forward. Between fiscal 2017 and fiscal 2022, Lowe's was able to increase diluted EPS by 149%. And this favorable trend certainly helped propel the stock price to new heights. With more share of revenue coming from pros, coupled with greater operational efficiencies, Lowe's bottom line could expand even further in the years ahead. 

In their last fiscal years, Home Depot generated revenue of $157 billion, while Lowe's registered sales of $97 billion. Over the past five years, Home Depot has averaged better growth than Lowe's. But it's not hard to believe that these two retailers could one day get closer to parity.

The home-improvement industry is massive, estimated to be worth over $900 billion. This means both Lowe's and Home Depot still command small fractions of the market share. With Lowe's making progress in the pro category but also investing in omnichannel capabilities, it could very well find itself inching closer and closer to Home Depot's lead. After all, these companies do sell similar products. Therefore, Lowe's has a larger growth opportunity because of its smaller size today. 

Reasons to sell 

As I touched on earlier, Lowe's has traditionally lagged Home Depot in profitability metrics. For example, Lowe's posted a gross margin of 32.3% and an operating margin of 7.6% in its last fiscal quarter (the fourth quarter of 2022, which ended Feb. 3), both below Home Depot's figures.

And Lowe's return on invested capital in fiscal 2022 of 30.4% was significantly lower than its larger rival's. This can be partly attributed to Home Depot's lead with professional customers but also the fact that it might just be a better organization from an operational perspective. Investors who believe that Lowe's will never catch up should probably consider selling shares. 

There's no doubt that Lowe's benefited from a surge in home-improvement demand throughout the pandemic. But this has largely abated. In its most recent fiscal quarter, Lowe's revenue was up a respectable 5.2%, but same-store sales were down 1.5%. And for fiscal 2023, management expects same-store sales to be flat to down 2% compared to fiscal 2022. This could be a clear indicator that macro headwinds are starting to really impact the business, with inflation and the threat of a recession causing consumers to delay renovation projects. 

And lastly, investors might want to sell Lowe's stock because of its current price-to-earnings (P/E) multiple of 19.9. This valuation is more expensive than the stock's trailing-12-month average. And it's pricier than Home Depot's P/E ratio, as well as that of the broader S&P 500 index.  

When you factor everything together, I wouldn't necessarily be a buyer or a seller of Lowe's shares. Consequently, this means the stock is a hold right now for current shareholders, in my opinion.