Is Lowe's Still Attractive After Recent Pullback and Slowing Home Improvement Demand in 2025?

• If you are wondering whether Lowe's Companies is a bargain or a value trap at around $243 a share, you are in the right place as we break down what the current price really implies.
• Despite being down 1.5% year to date and 8.9% over the last year, the stock has still delivered 24.7% over 3 years and 66.5% over 5 years, which hints at a longer term story that is not captured by the recent pullback.
• Recent headlines have focused on shifting home improvement demand, competition in big box retail, and how higher rates might be influencing big ticket renovation projects. All of this helps explain the more cautious tone in the share price. At the same time, coverage has highlighted Lowe's ongoing strategic focus on the professional contractor market and efficiency initiatives that could matter a lot for long term value.
• On our framework, Lowe's scores a 3 out of 6 valuation score, suggesting the market might be only half convinced it is undervalued. Next we will walk through several valuation approaches before exploring an even better way to think about what the stock is truly worth.

Find out why Lowe's Companies's -8.9% return over the last year is lagging behind its peers.

Approach 1: Lowe's Companies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and discounting those cash flows back to today in $ terms. For Lowe's, the 2 Stage Free Cash Flow to Equity model starts with last twelve months free cash flow of about $7.2 billion, then applies analyst forecasts and longer term growth assumptions.

According to these projections, Lowe's free cash flow could reach roughly $9.6 billion by 2030, with analyst estimates guiding the first few years and Simply Wall St extrapolating thereafter. When these future cash flows are discounted back to today, the model suggests an intrinsic value of about $269.57 per share.

Compared with the current share price around $243, the DCF implies the stock is about 9.8% undervalued. This is close enough to count as roughly in line with fair value rather than a deep bargain.

Result: ABOUT RIGHT

Lowe's Companies is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Lowe's Companies.

Approach 2: Lowe's Companies Price vs Earnings

For a mature, consistently profitable business like Lowe's Companies, the price to earnings (PE) ratio is a practical way to gauge whether the stock price makes sense relative to the cash the business is generating for shareholders. Investors typically pay higher PE multiples for companies with stronger growth prospects and lower perceived risk, while slower growth or higher uncertainty tends to justify a lower, more conservative PE.

Lowe's currently trades on a PE of about 20.2x, which is above the Specialty Retail industry average of roughly 17.9x, but below the broader peer group average of around 30.7x. To refine this comparison, Simply Wall St uses a proprietary Fair Ratio, which estimates what PE investors might reasonably pay based on Lowe's earnings growth outlook, industry, profit margins, size and risk profile. For Lowe's, that Fair Ratio is about 21.4x.

Because the Fair Ratio builds in company specific fundamentals rather than relying only on broad peer or sector averages, it provides a more tailored view of value. With the current PE of 20.2x sitting modestly below the 21.4x Fair Ratio, the shares appear slightly undervalued on this lens, though not dramatically so.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Lowe's Companies Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, an easy tool on Simply Wall St's Community page that lets you connect your view of Lowe's story with a concrete forecast for its future revenue, earnings, margins and ultimately a fair value you can compare with today’s price to decide whether to buy, hold or sell. A Narrative is simply your investment story written into the numbers, linking what you believe about Lowe's Pro segment expansion, housing market tailwinds, execution risks or digital competition to specific assumptions and a resulting fair value that automatically updates when new earnings, news or guidance arrives. For example, one investor might build a bullish Narrative that assumes stronger Pro market share gains and assigns a fair value closer to $325 per share, while a more cautious investor could emphasize slower growth, margin pressure and integration risk, arriving at a fair value nearer $221 per share, with both views living side by side on the platform so you can see exactly how different stories lead to different valuations.

Do you think there's more to the story for Lowe's Companies? Head over to our Community to see what others are saying!

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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