A Look at Lowe’s (LOW) Valuation Following Q3 Earnings Beat and Upgraded Sales Outlook

Lowe’s Companies (LOW) caught investor attention after posting an earnings beat for the third quarter and raising its full-year sales outlook to $86 billion. The company continues to see gains in online and Pro customer sales.

See our latest analysis for Lowe's Companies.

Lowe’s has seen a burst of renewed momentum this week, with the stock jumping over 5% after its earnings beat and upgraded sales outlook. Despite a year-to-date share price return of -5.1% and a 1-year total shareholder return of -9.7%, long-term investors have still notched an impressive 66% total return over five years. The market appears to be weighing recent acquisitions and near-term profit guidance alongside the company’s ongoing digital, Pro, and product expansion strategies, which points to both growth potential and a changing risk profile as Lowe’s positions itself for the next stage.

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With shares now up sharply following strong results and a raised sales target, the question remains: is Lowe’s trading at a discount to its true value, or is the market already factoring in its brighter outlook?

Most Popular Narrative: 15.9% Undervalued

With Lowe’s Companies’ fair value calculated at $278.56 by the most widely followed narrative, and the stock last closing at $234.29, this narrative sets a notably higher benchmark than current market pricing. This positions the shares as meaningfully undervalued in relation to a cluster of optimistic forecasts.

Expansion into the Pro contractor market and integration of new digital capabilities position Lowe's for sustained growth, operational efficiency, and greater customer wallet share. Market consolidation and scale advantages are expected to enhance supplier bargaining power and cost efficiencies, supporting long-term margin improvement.

Read the complete narrative.

What is the secret behind this sizeable upside? It hinges on ambitious growth rates, bolder margin expansion, and an earnings trajectory that most investors would envy. Could all this add up to support a market-beating valuation? Take a look inside to see the assumptions that drive this bullish outlook.

Result: Fair Value of $278.56 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, execution risks around recent acquisitions and ongoing margin pressures could quickly shift sentiment and challenge the optimistic outlook for Lowe's shares.

Find out about the key risks to this Lowe's Companies narrative.

Another View: Multiples Tell a Different Story

While some models point to undervaluation, our analysis of the company's price-to-earnings ratio suggests a more complicated picture. Lowe’s trades at 19.4x earnings, which is pricier than the US Specialty Retail sector at 18.2x but lower than peers averaging 30.1x. Still, the fair ratio is 20.6x. This hints that there could be a little more room to grow, or investors might be overpaying if expectations are not met. Which side will the market land on?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Lowe's Companies Narrative

If you want to dig deeper or share a perspective that’s different from these models, you can craft your own narrative in just minutes. Do it your way

A great starting point for your Lowe's Companies research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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