Lowe's Companies Inc (LOW)

Conclusion

Lowe's is a home improvement retailer in the United States and Canada, selling building materials, appliances, tools, garden products and décor to homeowners, renters and professional customers. At a price of 232.10 USD on 9 November 2026, its market capitalisation is 130.22 billion USD.

The verdict is fair. The price of 232.10 USD is above the fair value midpoint of 216.87 USD, giving a margin of safety of -6.6%. Current price-to-earnings of 19.6x and enterprise value to EBITDA of 13.2x sit close to their ten-year medians of 19.5x and 13.4x. The discounted cash flow gives 206.87 USD per share, and the fair value from historical multiples is 226.86 USD. The reverse DCF implies growth of 5.1% a year, while revenue has shrunk at a 5-year CAGR of -0.8% and free cash flow per share has grown at 2.1%.

The case rests on strong returns and cash generation. Return on invested capital is 25.3% against a WACC of 7.7%, free cash flow conversion is 1.05 over the last twelve months, and the company has beaten earnings estimates in all eight recent quarters. The weakest numbers are the 5-year revenue CAGR of -0.8%, net debt to EBITDA of 3.0x, and estimate revisions that are negative for both the current and next fiscal year, with four downgrades and no upgrades in the last 30 days.

Financial health

Financial strength is yellow: the Altman Z-score of 3.31 and low insolvency risk support it, while leverage and thin liquidity hold it back. The current ratio is 1.10 and the quick ratio 0.22, both neutral. Net debt to EBITDA is 3.0x and interest coverage is 6.5x, also neutral. Debt to equity is not available because the company reports negative shareholder equity. The Altman Z-score of 3.31 falls in the safe zone, although the model was designed for manufacturers and Lowe's is a retailer. Insolvency risk is low, about 2.4% by the estimate of the Ohlson model over one to two years, based on figures as of 31 January 2026.

Earnings quality

Earnings quality is green. Cash generation is the main support: free cash flow conversion is 1.05 over the last twelve months and 1.01 over five years, and the accrual ratio of -6.5% shows earnings backed by cash. Stock-based compensation is 0.3% of revenue, leaving free cash flow after it at 6.74 billion USD. The share count fell at a 5-year CAGR of -5.7%, which reflects buybacks. The Piotroski score is 6 of 9. The Beneish M-score is not available. The company beat earnings estimates in all eight recent quarters, with an average surprise of 2.9%. Estimates are being cut, with the current year down 1.6% over 90 days and the next year down 3.7%.

Profitability

Profitability is green. The operating margin of 11.4% is above its ten-year median of 10.6%, and the net margin of 7.3% is above its median of 6.6%. The gross margin of 33.1% is slightly below its median of 33.3%. Return on invested capital is 25.3% against a WACC of 7.7%, giving a ROIC minus WACC value of 17.6 points, and the five-year median ROIC is 35.2%. Return on equity is not a reliable guide because the company has negative equity. The DuPont split shows a net margin of 7.7% and an asset turnover of 1.59x, with the balance-sheet lever explaining the rest. The margin stability figure is 21.0%.

Growth

Growth is yellow. Revenue compounded at -3.9% over three years, -0.8% over five years and 3.9% over ten years. Revenue grew in 8 of the last 10 comparable years. Earnings per share compounded at 5.2% over three years, 8.8% over five years and 15.8% over ten years, helped by buybacks. Free cash flow per share compounded at 8.4% over three years, 2.1% over five years and 13.5% over ten years. Consensus expects earnings per share to grow 5.6% next year, but the recent estimate cuts suggest that expectation is under pressure. The pattern is a short-term decline in sales offset by per-share growth.

Valuation

Valuation is yellow: the price sits roughly at its own history, with the margin of safety slightly negative. Price-to-earnings is 19.6x against a ten-year median of 19.5x, a premium of 0.8%. Enterprise value to EBITDA is 13.2x against 13.4x, a discount of 1.9%. Price to free cash flow is 18.6x against 17.8x, a premium of 4.6%, and price to sales is 1.44x against 1.39x, a premium of 3.9%. The discounted cash flow gives 206.87 USD per share using a discount rate of 8.9%, and the terminal value makes up 55.3% of that figure. The fair value band runs from 173.49 to 260.24 USD, with a midpoint of 216.87 USD. The fair value from historical multiples is 226.86 USD. These figures are an order of magnitude built on fixed assumptions, not a price target. The dividend yield is 2.1%, the forward yield 2.2%, and the dividend takes 38.5% of free cash flow.

Risks

The weak numbers each point to a specific risk. Revenue shrinking at 0.8% a year over five years means that the per-share growth relies on buybacks and margins, and a further decline would weaken the earnings base. Net debt of 3.0x EBITDA limits flexibility if trading softens, and a liquidity ratio of 0.22 leaves little cushion. Estimate cuts for both the current and next year suggest analysts see weaker near-term earnings than the reported beats implied. Because the DCF relies on a terminal value of 55.3%, small changes in the discount rate or long-term growth would move the fair value substantially. Debt to equity and the Beneish M-score are not available. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot judge refinancing risk or which product lines drive the decline.