Intrinsic value of Lowe's - LOW

Previous Close

$85.27

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$85.27

 
Intrinsic value

$49.31

 
Up/down potential

-42%

 
Rating

sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LOW stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 74.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.07
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  59,074
  62,087
  65,247
  68,562
  72,040
  75,690
  79,519
  83,537
  87,754
  92,179
  96,824
  101,699
  106,816
  112,187
  117,824
  123,743
  129,955
  136,477
  143,324
  150,511
  158,057
  165,979
  174,297
  183,029
  192,196
  201,821
  211,927
  222,537
  233,677
  245,373
  257,653
Variable operating expenses, $m
 
  47,931
  50,371
  52,930
  55,615
  58,432
  61,388
  64,491
  67,746
  71,162
  74,748
  78,511
  82,462
  86,608
  90,960
  95,529
  100,325
  105,360
  110,646
  116,195
  122,020
  128,136
  134,557
  141,298
  148,375
  155,806
  163,608
  171,798
  180,398
  189,428
  198,908
Fixed operating expenses, $m
 
  8,906
  9,129
  9,357
  9,591
  9,831
  10,077
  10,328
  10,587
  10,851
  11,123
  11,401
  11,686
  11,978
  12,277
  12,584
  12,899
  13,221
  13,552
  13,891
  14,238
  14,594
  14,959
  15,333
  15,716
  16,109
  16,512
  16,924
  17,348
  17,781
  18,226
Total operating expenses, $m
  54,103
  56,837
  59,500
  62,287
  65,206
  68,263
  71,465
  74,819
  78,333
  82,013
  85,871
  89,912
  94,148
  98,586
  103,237
  108,113
  113,224
  118,581
  124,198
  130,086
  136,258
  142,730
  149,516
  156,631
  164,091
  171,915
  180,120
  188,722
  197,746
  207,209
  217,134
Operating income, $m
  4,971
  5,250
  5,747
  6,275
  6,834
  7,426
  8,054
  8,718
  9,421
  10,165
  10,953
  11,787
  12,668
  13,601
  14,587
  15,629
  16,731
  17,895
  19,126
  20,426
  21,799
  23,249
  24,781
  26,398
  28,105
  29,906
  31,808
  33,814
  35,931
  38,164
  40,519
EBITDA, $m
  6,558
  6,913
  7,496
  8,113
  8,765
  9,455
  10,185
  10,957
  11,773
  12,636
  13,548
  14,512
  15,531
  16,607
  17,744
  18,945
  20,214
  21,553
  22,967
  24,460
  26,035
  27,698
  29,452
  31,303
  33,256
  35,315
  37,487
  39,778
  42,193
  44,740
  47,424
Interest expense (income), $m
  535
  548
  600
  656
  714
  775
  840
  907
  978
  1,052
  1,130
  1,212
  1,298
  1,388
  1,482
  1,582
  1,686
  1,795
  1,910
  2,031
  2,157
  2,290
  2,430
  2,576
  2,730
  2,891
  3,061
  3,239
  3,426
  3,622
  3,828
Earnings before tax, $m
  4,419
  4,702
  5,147
  5,619
  6,120
  6,651
  7,214
  7,811
  8,443
  9,113
  9,823
  10,575
  11,371
  12,213
  13,104
  14,047
  15,045
  16,100
  17,216
  18,395
  19,642
  20,959
  22,351
  23,822
  25,375
  27,015
  28,747
  30,575
  32,505
  34,542
  36,691
Tax expense, $m
  1,873
  1,270
  1,390
  1,517
  1,652
  1,796
  1,948
  2,109
  2,280
  2,461
  2,652
  2,855
  3,070
  3,297
  3,538
  3,793
  4,062
  4,347
  4,648
  4,967
  5,303
  5,659
  6,035
  6,432
  6,851
  7,294
  7,762
  8,255
  8,776
  9,326
  9,907
Net income, $m
  2,546
  3,432
  3,758
  4,102
  4,468
  4,855
  5,266
  5,702
  6,164
  6,653
  7,171
  7,720
  8,301
  8,915
  9,566
  10,255
  10,983
  11,753
  12,568
  13,429
  14,339
  15,300
  16,316
  17,390
  18,524
  19,721
  20,985
  22,320
  23,729
  25,216
  26,785

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  478
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  31,266
  32,354
  34,001
  35,728
  37,541
  39,442
  41,438
  43,531
  45,729
  48,035
  50,455
  52,996
  55,662
  58,461
  61,399
  64,483
  67,720
  71,119
  74,687
  78,432
  82,364
  86,493
  90,827
  95,377
  100,154
  105,170
  110,436
  115,965
  121,770
  127,865
  134,264
Adjusted assets (=assets-cash), $m
  30,788
  32,354
  34,001
  35,728
  37,541
  39,442
  41,438
  43,531
  45,729
  48,035
  50,455
  52,996
  55,662
  58,461
  61,399
  64,483
  67,720
  71,119
  74,687
  78,432
  82,364
  86,493
  90,827
  95,377
  100,154
  105,170
  110,436
  115,965
  121,770
  127,865
  134,264
Revenue / Adjusted assets
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
  1.919
Average production assets, $m
  19,806
  20,799
  21,858
  22,968
  24,133
  25,356
  26,639
  27,985
  29,398
  30,880
  32,436
  34,069
  35,783
  37,583
  39,471
  41,454
  43,535
  45,720
  48,013
  50,421
  52,949
  55,603
  58,389
  61,315
  64,386
  67,610
  70,996
  74,550
  78,282
  82,200
  86,314
Working capital, $m
  69
  745
  783
  823
  864
  908
  954
  1,002
  1,053
  1,106
  1,162
  1,220
  1,282
  1,346
  1,414
  1,485
  1,559
  1,638
  1,720
  1,806
  1,897
  1,992
  2,092
  2,196
  2,306
  2,422
  2,543
  2,670
  2,804
  2,944
  3,092
Total debt, $m
  12,649
  13,335
  14,571
  15,869
  17,230
  18,658
  20,157
  21,729
  23,379
  25,111
  26,929
  28,837
  30,839
  32,941
  35,148
  37,464
  39,895
  42,447
  45,127
  47,940
  50,893
  53,993
  57,248
  60,665
  64,253
  68,020
  71,975
  76,127
  80,486
  85,064
  89,869
Total liabilities, $m
  23,612
  24,298
  25,534
  26,832
  28,193
  29,621
  31,120
  32,692
  34,342
  36,074
  37,892
  39,800
  41,802
  43,904
  46,111
  48,427
  50,858
  53,410
  56,090
  58,903
  61,856
  64,956
  68,211
  71,628
  75,216
  78,983
  82,938
  87,090
  91,449
  96,027
  100,832
Total equity, $m
  7,654
  8,056
  8,466
  8,896
  9,348
  9,821
  10,318
  10,839
  11,386
  11,961
  12,563
  13,196
  13,860
  14,557
  15,288
  16,056
  16,862
  17,709
  18,597
  19,530
  20,509
  21,537
  22,616
  23,749
  24,938
  26,187
  27,499
  28,875
  30,321
  31,838
  33,432
Total liabilities and equity, $m
  31,266
  32,354
  34,000
  35,728
  37,541
  39,442
  41,438
  43,531
  45,728
  48,035
  50,455
  52,996
  55,662
  58,461
  61,399
  64,483
  67,720
  71,119
  74,687
  78,433
  82,365
  86,493
  90,827
  95,377
  100,154
  105,170
  110,437
  115,965
  121,770
  127,865
  134,264
Debt-to-equity ratio
  1.653
  1.660
  1.720
  1.780
  1.840
  1.900
  1.950
  2.000
  2.050
  2.100
  2.140
  2.190
  2.230
  2.260
  2.300
  2.330
  2.370
  2.400
  2.430
  2.450
  2.480
  2.510
  2.530
  2.550
  2.580
  2.600
  2.620
  2.640
  2.650
  2.670
  2.690
Adjusted equity ratio
  0.234
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,546
  3,432
  3,758
  4,102
  4,468
  4,855
  5,266
  5,702
  6,164
  6,653
  7,171
  7,720
  8,301
  8,915
  9,566
  10,255
  10,983
  11,753
  12,568
  13,429
  14,339
  15,300
  16,316
  17,390
  18,524
  19,721
  20,985
  22,320
  23,729
  25,216
  26,785
Depreciation, amort., depletion, $m
  1,587
  1,664
  1,749
  1,837
  1,931
  2,028
  2,131
  2,239
  2,352
  2,470
  2,595
  2,726
  2,863
  3,007
  3,158
  3,316
  3,483
  3,658
  3,841
  4,034
  4,236
  4,448
  4,671
  4,905
  5,151
  5,409
  5,680
  5,964
  6,263
  6,576
  6,905
Funds from operations, $m
  4,762
  5,096
  5,506
  5,940
  6,398
  6,884
  7,397
  7,941
  8,515
  9,123
  9,766
  10,445
  11,163
  11,922
  12,724
  13,571
  14,466
  15,411
  16,409
  17,462
  18,574
  19,748
  20,988
  22,295
  23,674
  25,130
  26,665
  28,284
  29,991
  31,792
  33,690
Change in working capital, $m
  -22
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  68
  71
  75
  78
  82
  86
  91
  95
  100
  105
  110
  116
  121
  127
  134
  140
  147
Cash from operations, $m
  4,784
  4,832
  5,468
  5,900
  6,357
  6,840
  7,351
  7,893
  8,465
  9,070
  9,710
  10,387
  11,102
  11,858
  12,656
  13,500
  14,391
  15,332
  16,326
  17,376
  18,484
  19,653
  20,888
  22,190
  23,564
  25,014
  26,544
  28,157
  29,858
  31,651
  33,542
Maintenance CAPEX, $m
  0
  -1,584
  -1,664
  -1,749
  -1,837
  -1,931
  -2,028
  -2,131
  -2,239
  -2,352
  -2,470
  -2,595
  -2,726
  -2,863
  -3,007
  -3,158
  -3,316
  -3,483
  -3,658
  -3,841
  -4,034
  -4,236
  -4,448
  -4,671
  -4,905
  -5,151
  -5,409
  -5,680
  -5,964
  -6,263
  -6,576
New CAPEX, $m
  -1,197
  -994
  -1,059
  -1,111
  -1,165
  -1,223
  -1,283
  -1,346
  -1,413
  -1,483
  -1,556
  -1,633
  -1,714
  -1,799
  -1,889
  -1,983
  -2,081
  -2,185
  -2,294
  -2,408
  -2,528
  -2,654
  -2,786
  -2,925
  -3,071
  -3,224
  -3,385
  -3,554
  -3,732
  -3,918
  -4,114
Cash from investing activities, $m
  -1,343
  -2,578
  -2,723
  -2,860
  -3,002
  -3,154
  -3,311
  -3,477
  -3,652
  -3,835
  -4,026
  -4,228
  -4,440
  -4,662
  -4,896
  -5,141
  -5,397
  -5,668
  -5,952
  -6,249
  -6,562
  -6,890
  -7,234
  -7,596
  -7,976
  -8,375
  -8,794
  -9,234
  -9,696
  -10,181
  -10,690
Free cash flow, $m
  3,441
  2,254
  2,746
  3,041
  3,354
  3,687
  4,040
  4,415
  4,813
  5,236
  5,684
  6,159
  6,662
  7,196
  7,761
  8,360
  8,994
  9,665
  10,375
  11,127
  11,922
  12,764
  13,653
  14,594
  15,588
  16,639
  17,749
  18,923
  20,162
  21,470
  22,852
Issuance/(repayment) of debt, $m
  1,209
  1,164
  1,237
  1,297
  1,361
  1,428
  1,499
  1,573
  1,650
  1,732
  1,818
  1,908
  2,002
  2,102
  2,206
  2,316
  2,431
  2,552
  2,679
  2,813
  2,953
  3,100
  3,255
  3,417
  3,588
  3,767
  3,955
  4,152
  4,360
  4,577
  4,806
Issuance/(repurchase) of shares, $m
  -3,800
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,536
  1,164
  1,237
  1,297
  1,361
  1,428
  1,499
  1,573
  1,650
  1,732
  1,818
  1,908
  2,002
  2,102
  2,206
  2,316
  2,431
  2,552
  2,679
  2,813
  2,953
  3,100
  3,255
  3,417
  3,588
  3,767
  3,955
  4,152
  4,360
  4,577
  4,806
Total cash flow (excl. dividends), $m
  896
  3,417
  3,982
  4,338
  4,715
  5,115
  5,539
  5,988
  6,464
  6,968
  7,501
  8,066
  8,665
  9,298
  9,967
  10,676
  11,425
  12,217
  13,055
  13,940
  14,875
  15,864
  16,908
  18,011
  19,176
  20,406
  21,704
  23,075
  24,521
  26,048
  27,658
Retained Cash Flow (-), $m
  2,314
  -402
  -410
  -430
  -451
  -474
  -497
  -521
  -547
  -574
  -603
  -633
  -664
  -697
  -732
  -768
  -806
  -846
  -888
  -933
  -979
  -1,028
  -1,079
  -1,133
  -1,190
  -1,249
  -1,311
  -1,377
  -1,445
  -1,518
  -1,593
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,015
  3,572
  3,908
  4,264
  4,641
  5,042
  5,466
  5,917
  6,393
  6,899
  7,434
  8,001
  8,601
  9,236
  9,908
  10,619
  11,371
  12,166
  13,007
  13,896
  14,836
  15,829
  16,878
  17,986
  19,157
  20,393
  21,698
  23,076
  24,530
  26,065
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  2,813
  3,088
  3,108
  3,095
  3,051
  2,975
  2,869
  2,734
  2,574
  2,393
  2,195
  1,986
  1,770
  1,554
  1,342
  1,140
  951
  778
  625
  491
  377
  284
  208
  149
  104
  70
  46
  29
  18
  11
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Lowe’s Companies, Inc. operates as a home improvement retailer. It offers products for home 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, lawn and garden, seasonal living, paint, flooring, millwork, 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 January 29, 2016, it operated 1,857 home improvement and hardware stores in the United States, Canada, and Mexico. The company also sells its products through online sites comprising Lowes.com, Lowes.ca, and ATGstores.com, as well as through mobile applications. Lowe's Companies, Inc. was founded in 1946 and is based in Mooresville, North Carolina.

FINANCIAL RATIOS  of  Lowe's (LOW)

Valuation Ratios
P/E Ratio 30.5
Price to Sales 1.3
Price to Book 10.1
Price to Tangible Book
Price to Cash Flow 16.2
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate 5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 36%
Cap. Spend. - 3 Yr. Gr. Rate -0.2%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 150.8%
Total Debt to Equity 165.3%
Interest Coverage 9
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 12.2%
Ret/ On T. Cap. - 3 Yr. Avg. 11.6%
Return On Equity 28.9%
Return On Equity - 3 Yr. Avg. 23.8%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 34.8%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin 11.1%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 7.7%
Pre-Tax Margin 7.5%
Pre-Tax Margin - 3 Yr. Avg. 7.3%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 42.4%
Eff/ Tax Rate - 3 Yr. Avg. 39%
Payout Ratio 37.6%

LOW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LOW stock intrinsic value calculation we used $59074 million for the last fiscal year's total revenue generated by Lowe's. The default revenue input number comes from 2016 income statement of Lowe's. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LOW stock valuation model: a) initial revenue growth rate of 5.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.2%, whose default value for LOW is calculated based on our internal credit rating of Lowe's, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Lowe's.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LOW stock the variable cost ratio is equal to 77.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8689 million in the base year in the intrinsic value calculation for LOW stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.5% for Lowe's.

Corporate tax rate of 27% is the nominal tax rate for Lowe's. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LOW stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LOW are equal to 33.5%.

Life of production assets of 12.5 years is the average useful life of capital assets used in Lowe's operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LOW is equal to 1.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7654 million for Lowe's - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 868.872 million for Lowe's is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Lowe's at the current share price and the inputted number of shares is $74.1 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
HD Home Depot 156.12 98.94  sell
BLDR Builders First 16.05 9.84  sell
BMCH BMC Stock Hold 23.55 1.59  str.sell

COMPANY NEWS

▶ Better Buy: Home Depot vs. Lowe's   [Apr-26-17 09:22PM  Motley Fool]
▶ Vetr Upgrades Lowe's On New All-Time High   [Apr-24-17 05:01PM  Benzinga]
▶ Retail And E-Commerce News And Stocks To Watch   [12:29PM  Investor's Business Daily]
▶ Here's the Bullish Lowdown on Lowe's   [11:39AM  TheStreet.com]
▶ Housing Starts Decline in March   [Apr-21-17 05:42PM  GuruFocus.com]
▶ Lowe's Stock Trades Ex-Dividend Monday   [08:37AM  Investopedia]
▶ Lowe's Prices $3.0 Billion Notes Offering   [04:35PM  PR Newswire]
▶ Why Is Amazon Interested in Plug Power?   [Apr-18-17 03:32PM  Investopedia]
▶ ETFs with exposure to Lowes Cos., Inc. : April 11, 2017   [Apr-11-17 02:21PM  Capital Cube]
▶ Why Lowe's Companies Inc. Stock Rose 11% Last Month   [Apr-10-17 01:36PM  Motley Fool]
▶ 3 Residential Construction Stocks to Buy in 2017   [Apr-05-17 10:00AM  Motley Fool]
▶ Pro: 3 bright spots in retail   [Apr-04-17 05:09PM  CNBC Videos]
▶ [$$] Lowe's Shares Could Rise 20% or More   [Apr-01-17 12:01AM  at Barrons.com]
▶ Restoration Hardware: So Much For That GoldmanDowngrade   [Mar-30-17 04:04PM  at Barrons.com]
▶ Lowe's Companies, Inc. Declares Cash Dividend   [Mar-24-17 04:30PM  PR Newswire]
▶ Better Buy: Home Depot, Inc. vs. Target   [Mar-14-17 06:43PM  at Motley Fool]
▶ Are CEOs Losing Faith in the Trump Rally?   [Mar-13-17 06:00AM  at Investopedia]
▶ Lowe's Can Keep Climbing On Strong Sales Trends   [Mar-02-17 02:46PM  at Barrons.com]
Stock chart of LOW Financial statements of LOW
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.