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Lowe's Companies

NYSE:LOW
Snowflake Description

Proven track record with reasonable growth potential and pays a dividend.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
LOW
NYSE
$63B
Market Cap
Home Improvement Retail
Company description

Lowe’s Companies, Inc. operates as a home improvement company in the United States, Canada, and Mexico. More info.


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3 Month History
LOW
Industry
5yr Volatility vs Market

Value

 Is Lowe's Companies undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Lowe's Companies to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

Current Discount
Amount off the current price Lowe's Companies is available for.
Intrinsic value
9%
Share price is $75.69 vs Future cash flow value of $83.26
Current Discount Checks
For Lowe's Companies to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
  • Lowe's Companies's share price is below the future cash flow value, but not at a significant discount (< 20%).
  • Lowe's Companies's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Lowe's Companies's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Lowe's Companies's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Good value based on earnings compared to the Retailing industry average.
  • Overvalued based on earnings compared to the overall market.
Price based on expected Growth
Does Lowe's Companies's expected growth come at a high price?
  • Good value based on expected growth next year.
Price based on value of assets
What value do investors place on Lowe's Companies's assets?
  • Good value based on assets compared to the Retailing industry average.
X
Value checks
We assess Lowe's Companies's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Retailing industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Retailing industry average (and greater than 0)? (1 check)
  5. Lowe's Companies has a total score of 3/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (41.67%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for Lowe's Companies is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$18,116

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $5,467 × (1 + 2.3%) ÷ (9.36% – 2.3%)

Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
$79,594

Present value of terminal value:
$50,889

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($69,006 / 829)

Value per share:
$83.26

Current discount (share price of $75.69): 9%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 9.36% = 2.33% + (0.916 * 7.67%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.916 = 0.777 (1 + (1- 30%) (25.61%))

Levered Beta used in calculation = 0.916



Assumptions
  1. The risk free rate of 2.33% is from the 10 year government bond rate in US.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Lowe's Companies expected to perform in the next 1 to 3 years based on estimates from 23 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    87%
    Expected earnings growth over 3 years.
    Future Earnings growth analysis
    Is Lowe's Companies expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are Lowe's Companies's annual earnings growth expected to exceed 3.4% over the next 3 years?

    • After 1 year
    • After 3 years
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • Lowe's Companies is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

    Improvement & Relative to industry
    • Expected to be above the Retailing industry average.
    • An improvement in Lowe's Companies's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess Lowe's Companies's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    Lowe's Companies has a total score of 4/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has Lowe's Companies performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare Lowe's Companies's growth in the last year to its industry (Retailing).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • Lowe's Companies's earnings growth has not matched the industry average in the past year.
    • Lowe's Companies's 1 year earnings growth is less than its 5 year annual average (6.4% vs 15.1%).
    • Lowe's Companies has delivered strong earnings growth in the past 5 years.
    Profit History
    Lowe's Companies's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Strong return on shareholders funds (ROE) last year.
    • Lowe's Companies performed above the Retailing industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) is broadly the same over 3 years.
    X
    Past performance checks
    We assess Lowe's Companies's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Retailing industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    Lowe's Companies has a total score of 4/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is Lowe's Companies's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up Lowe's Companies's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • Lowe's Companies is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
    • Lowe's Companies's long term commitments exceed its cash and other short term assets.
    Balance sheet
    This treemap shows a more detailed breakdown of Lowe's Companies's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • High level of stock/ inventory/ unsold assets.
    • Total debt is not covered by total short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (290%) compared to net worth is high (greater 40%).
    • The level of debt compared to net worth has increased over the past 5 years (63% vs 290% today).
    • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
    • Interest on debt is well covered by earnings (9.1x coverage).
    X
    Financial health checks
    We assess Lowe's Companies's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. Lowe's Companies has a total score of 3/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is Lowe's Companies's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    2.18%
    Current annual income from Lowe's Companies dividends. Estimated to be 2.27% next year.
    If you bought $2,000 of Lowe's Companies shares you are expected to receive $44 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying below low risk savings rate. (2.25%)
    • Paying below the markets top dividend payers. (3.18%)
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Dividends per share have been stable in the past 10 years.
    • Dividends per share have increased over the past 10 years.
    Current Payout to shareholders
    What portion of Lowe's Companies's earnings are paid to the shareholders as a dividend.
    • Dividends paid are well covered by net profit (2.4x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be well covered by net profit (2.8x coverage).
    X
    Income/ dividend checks
    We assess Lowe's Companies's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can Lowe's Companies afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. Lowe's Companies has a total score of 4/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of Lowe's Companies's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    Robert Niblock, image provided by Google.
    Robert Niblock
    COMPENSATION$12,670,019
    AGE54
    CEO Bio

    Mr. Robert Alan Niblock has been the Chief Executive Officer of Lowe's Companies, Inc. since January 28, 2005. Mr. Niblock has been the President of Lowe's Companies Inc. since May 2011. He joined Lowe's Companies, Inc. in 1993 and served as its Executive Vice President from 2001 to 2003, Chief Financial Officer from 2000 to 2003, Senior Vice President of Finance from 1999 to 2000 and Vice President & Treasurer from 1997 to 1998. He held a nine-year career with accounting firm Ernst & Young. He served as the Chairman of the Board at Retail Industry Leaders Association from 2008 to 2009 and Vice Chairman from 2006 to 2007. He serves as the Chairman of Lowe's Companies, Inc. He has been a Director of ConocoPhillips Co., Inc. and ConocoPhillips (U.K.) Limited since February 12, 2010. He serves as Director of Hydrox Holdings Pty Ltd. He has been a Director at Lowe's Companies, Inc. since April 5, 2004. He has been a Director/Member of Retail Industry Leaders Association since 2003. He is a Certified Public Accountant. Mr. Niblock holds a Bachelor's degree in Accounting from the University of North Carolina-Charlotte.

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the Lowe's Companies management team:

    Management tenure
    3.6 years
    • The tenure for the Lowe's Companies management team is about average.
    Management Team

    Robert Niblock

    TITLE
    Chairman
    COMPENSATION
    $12,670,019
    AGE
    54

    Ricky Damron

    TITLE
    Chief Operating Officer
    COMPENSATION
    $4,700,659
    AGE
    54

    Bill McCanless

    TITLE
    Chief Compliance Officer
    COMPENSATION
    $2,650,124
    AGE
    59

    Jeff Weber

    TITLE
    Chief Human Resources Officer
    COMPENSATION
    $3,289,477
    AGE
    50

    Marshall Croom

    TITLE
    Chief Financial Officer
    AGE
    56

    Matthew Hollifield

    TITLE
    Chief Accounting Officer and Senior Vice President
    AGE
    51
    Board of Directors Tenure

    Average tenure of the Lowe's Companies board of directors:

    Board tenure
    9.2 years
    • The tenure for the Lowe's Companies board of directors is about average.
    Board of Directors

    Robert Niblock

    TITLE
    Chairman
    COMPENSATION
    $12,670,019
    AGE
    54

    Marshall Larsen

    TITLE
    Lead Independent Director
    COMPENSATION
    $272,665
    AGE
    69

    Raul Alvarez

    TITLE
    Independent Director
    COMPENSATION
    $257,665
    AGE
    62

    Eric Wiseman

    TITLE
    Independent Director
    COMPENSATION
    $252,665
    AGE
    61

    Bray Braly

    TITLE
    Independent Director
    COMPENSATION
    $243,915
    AGE
    56

    Bob Johnson

    TITLE
    Independent Director
    COMPENSATION
    $232,665
    AGE
    71
    Recent Insider Trading
    • Lowe's Companies insiders have sold more shares than they have bought in the past 3 months.
    Who owns this company?
    X
    Management checks
    We assess Lowe's Companies's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. Lowe's Companies has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Company Info

    Description

    Lowe’s Companies, Inc. operates as a home improvement company in the United States, Canada, and Mexico. It offers a line of products for maintenance, repair, remodeling, and decorating. The company provides home improvement products in various categories, such as lumber and building materials, tools and hardware, appliances, fashion fixtures, rough plumbing and electrical, seasonal living, lawn and garden, paint, millwork, flooring, kitchens, outdoor power equipment, and home fashions. It also offers installation services through independent contractors in various product categories; extended protection plans; and in-warranty and out-of-warranty repair services. The company sells its national brand-name merchandise and private branded products to homeowners, renters, and professional customers; and retail customers comprising individual homeowners and renters. As of March 24, 2017, it operated 2,365 home improvement and hardware stores. The company also sells its products through online sites comprising Lowes.com and Lowesforpros.com; and through mobile applications. Lowe’s Companies, Inc. was founded in 1946 and is headquartered in Mooresville, North Carolina.

    Details
    Name:Lowe's Companies, Inc.
    Ticker:LOW
    Exchange:NYSE
    Founded:1946
    Market Cap:$62,734 million
    Website:http://www.lowes.com
    Listings
    Map

    1000 Lowe’s Boulevard, Mooresville, 28117, United States

    Number of employees
    Street

    Current staff
    Staff numbers
    240,000
    Lowe's Companies employees.
    Industry
    Industry:Home Improvement Retail
    Sector:Retailing