Is Now the Right Moment to Reassess Lowe’s Amid Its 8.7% Monthly Share Slide?

If you are eyeing Lowe's Companies stock and wondering whether it is time to buy, hold, or cash out, you are not alone. The home improvement giant has been drawing attention from both long-term investors and those tracking recent swings. Over the past week, shares dipped by 4.2%, deepening a 30-day slide to -8.7%. Even so, zooming out reminds us that Lowe's is still sitting on a gain of nearly 33% over three years and 56% over five years. That kind of track record tends to raise eyebrows whenever a pullback appears on the chart.

What is behind these moves? Some of it reflects shifting sentiment across the home improvement sector, with broader market jitters about consumer spending and a changing interest rate environment. Investors have been reevaluating which companies can weather slower growth and which might still surprise on the upside. That is why valuation comes into sharp focus during times like these, as buyers and sellers alike try to figure out if Lowe's is being unfairly marked down, or if there is still risk ahead.

To help you get perspective, we look at valuation using six checks that cover different approaches from price multiples to future growth outlook. Out of those, Lowe's is currently undervalued on two checks, earning a valuation score of 2. We will break down what that means in detail, then go a step further and share a fresh angle that most investors overlook when sizing up value.

Lowe's Companies scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

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

The Discounted Cash Flow (DCF) model estimates what Lowe's Companies is worth by projecting its future cash flows and discounting them back to today's value. This method provides an intrinsic value based on the company's ability to generate free cash flow in the years ahead.

Currently, Lowe's reported Free Cash Flow (FCF) stands at approximately $7.88 billion. Analyst estimates provide detailed projections for the next five years, with more distant numbers extrapolated. Looking ahead, projections suggest FCF will be $8.09 billion in 2026, then fluctuate over the following years, reaching around $5.66 billion by 2029 and $5.50 billion by 2035. These estimates help assess the trajectory of Lowe's cash-producing power and its sustainability over time.

Using the 2 Stage Free Cash Flow to Equity model, the DCF calculation results in an intrinsic value of $145.28 per share. However, when compared to Lowe's current share price, this implies the stock is about 69.6% overvalued. In other words, the market is pricing in future growth and profitability well above what these cash flow projections justify.

Result: OVERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Lowe's Companies may be overvalued by 69.6%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Lowe's Companies Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a go-to valuation metric for profitable companies like Lowe's because it tells us how much investors are willing to pay today for each dollar of current earnings. For mature and consistently profitable businesses, this measure provides useful insight into whether a stock is reasonably priced relative to its earnings power.

The right PE ratio, however, is not set in stone. It should reflect expectations for future earnings growth and the risks involved. Higher growth prospects or lower risks typically justify a higher PE multiple. The opposite holds true for slower-growing, riskier companies.

At the moment, Lowe's trades at a PE ratio of 20.2x. That sits above the average PE for the broader specialty retail industry, which stands at 17.3x, but well below the average of its direct peers at 47.1x. Benchmarks like these provide some context, but they do not always capture company-specific strengths or weaknesses.

That is where Simply Wall St's “Fair Ratio” comes in. This proprietary metric estimates what a fair PE should be based on factors unique to the company, including its earnings growth outlook, industry dynamics, profit margin, size, and risk profile. It goes beyond simple peer and industry comparisons to paint a more complete valuation picture.

For Lowe's, the Fair Ratio calculation comes out to 21.1x. With Lowe's actually trading at 20.2x, the current valuation is in line with what is reasonable for its circumstances, suggesting investors are pricing the stock ABOUT RIGHT for its fundamentals today.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

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

Earlier we mentioned there is an even better way to understand valuation. Let us introduce you to Narratives, a game-changing approach that helps you make smarter investment decisions by marrying a company's story with numbers you believe in.

A Narrative is simply your perspective on a company, where you combine your own view of its future, such as assumptions on revenue, profit margins, risks, and industry dynamics, with a forecast and an estimate of what you think is a fair value for the stock.

Rather than just plugging in numbers or relying only on ratios, a Narrative connects the dots between a company’s unique business journey, a financial outlook, and what that journey means for today’s price. This lets you track and refine your thesis as new information arrives.

This tool is easy to use, accessible within the Simply Wall St Community page, and is leveraged by millions of investors to compare their Fair Value estimates to the current market price and decide when it is time to buy, sell, or wait.

Every Narrative is dynamic and automatically updates whenever key news, earnings releases, or market shifts occur, so your view stays relevant and actionable.

For example, some investors currently argue that Lowe's future in digital and Pro markets will take it toward a $325 price target, while others see margin pressures and growth risks putting fair value closer to $221. This shows how Narratives empower you to invest with context tailored to your outlook.

Do you think there's more to the story for Lowe's Companies? Create your own Narrative to let the Community know!

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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