Intrinsic value of Lowe's - LOW

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$76.07

  Intrinsic Value

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  Value-price divergence*

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$76.07

 
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*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 2017), $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 64.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  10.06
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  65,017
  64,745
  70,663
  76,829
  83,247
  89,921
  96,860
  104,071
  111,564
  119,351
  127,446
  135,862
  144,617
  153,727
  163,210
  173,088
  183,382
  194,114
  205,309
  216,992
  229,190
  241,931
  255,246
  269,164
  283,720
  298,947
  314,881
  331,561
  349,026
  367,318
  386,480
Variable operating expenses, $m
 
  59,242
  64,656
  70,298
  76,171
  82,278
  88,627
  95,225
  102,081
  109,207
  116,613
  124,314
  132,324
  140,660
  149,337
  158,376
  167,795
  177,615
  187,858
  198,548
  209,709
  221,367
  233,550
  246,285
  259,604
  273,536
  288,116
  303,379
  319,359
  336,096
  353,629
Fixed operating expenses, $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
Total operating expenses, $m
  59,171
  59,242
  64,656
  70,298
  76,171
  82,278
  88,627
  95,225
  102,081
  109,207
  116,613
  124,314
  132,324
  140,660
  149,337
  158,376
  167,795
  177,615
  187,858
  198,548
  209,709
  221,367
  233,550
  246,285
  259,604
  273,536
  288,116
  303,379
  319,359
  336,096
  353,629
Operating income, $m
  5,846
  5,503
  6,006
  6,530
  7,076
  7,643
  8,233
  8,846
  9,483
  10,145
  10,833
  11,548
  12,292
  13,067
  13,873
  14,713
  15,587
  16,500
  17,451
  18,444
  19,481
  20,564
  21,696
  22,879
  24,116
  25,410
  26,765
  28,183
  29,667
  31,222
  32,851
EBITDA, $m
  7,436
  7,239
  7,900
  8,589
  9,307
  10,053
  10,829
  11,635
  12,473
  13,343
  14,248
  15,189
  16,168
  17,187
  18,247
  19,351
  20,502
  21,702
  22,954
  24,260
  25,623
  27,048
  28,536
  30,093
  31,720
  33,422
  35,204
  37,069
  39,021
  41,066
  43,208
Interest expense (income), $m
  619
  548
  647
  751
  860
  973
  1,090
  1,212
  1,339
  1,471
  1,609
  1,751
  1,899
  2,053
  2,214
  2,381
  2,555
  2,736
  2,925
  3,122
  3,328
  3,543
  3,767
  4,002
  4,247
  4,503
  4,771
  5,052
  5,346
  5,653
  5,975
Earnings before tax, $m
  5,201
  4,956
  5,359
  5,779
  6,216
  6,671
  7,143
  7,634
  8,144
  8,673
  9,224
  9,797
  10,393
  11,013
  11,659
  12,332
  13,033
  13,764
  14,526
  15,322
  16,153
  17,021
  17,929
  18,877
  19,869
  20,907
  21,994
  23,131
  24,322
  25,569
  26,875
Tax expense, $m
  2,108
  1,338
  1,447
  1,560
  1,678
  1,801
  1,929
  2,061
  2,199
  2,342
  2,491
  2,645
  2,806
  2,974
  3,148
  3,330
  3,519
  3,716
  3,922
  4,137
  4,361
  4,596
  4,841
  5,097
  5,365
  5,645
  5,938
  6,245
  6,567
  6,904
  7,256
Net income, $m
  3,093
  3,618
  3,912
  4,219
  4,538
  4,870
  5,214
  5,573
  5,945
  6,332
  6,734
  7,152
  7,587
  8,040
  8,511
  9,002
  9,514
  10,047
  10,604
  11,185
  11,792
  12,426
  13,088
  13,780
  14,505
  15,262
  16,055
  16,885
  17,755
  18,665
  19,619

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  577
  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
  34,408
  33,739
  36,823
  40,036
  43,380
  46,858
  50,474
  54,232
  58,137
  62,195
  66,413
  70,799
  75,361
  80,108
  85,050
  90,197
  95,561
  101,154
  106,988
  113,076
  119,432
  126,072
  133,010
  140,263
  147,848
  155,783
  164,086
  172,778
  181,879
  191,411
  201,396
Adjusted assets (=assets-cash), $m
  33,831
  33,739
  36,823
  40,036
  43,380
  46,858
  50,474
  54,232
  58,137
  62,195
  66,413
  70,799
  75,361
  80,108
  85,050
  90,197
  95,561
  101,154
  106,988
  113,076
  119,432
  126,072
  133,010
  140,263
  147,848
  155,783
  164,086
  172,778
  181,879
  191,411
  201,396
Revenue / Adjusted assets
  1.922
  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
  19,763
  21,690
  23,672
  25,738
  27,888
  30,124
  32,448
  34,864
  37,374
  39,983
  42,694
  45,514
  48,447
  51,498
  54,675
  57,985
  61,433
  65,028
  68,779
  72,692
  76,779
  81,047
  85,507
  90,170
  95,046
  100,147
  105,485
  111,073
  116,924
  123,051
  129,471
Working capital, $m
  26
  777
  848
  922
  999
  1,079
  1,162
  1,249
  1,339
  1,432
  1,529
  1,630
  1,735
  1,845
  1,959
  2,077
  2,201
  2,329
  2,464
  2,604
  2,750
  2,903
  3,063
  3,230
  3,405
  3,587
  3,779
  3,979
  4,188
  4,408
  4,638
Total debt, $m
  15,699
  14,375
  16,691
  19,104
  21,616
  24,228
  26,943
  29,765
  32,698
  35,745
  38,913
  42,207
  45,633
  49,198
  52,909
  56,775
  60,804
  65,004
  69,385
  73,957
  78,730
  83,717
  88,927
  94,374
  100,071
  106,030
  112,266
  118,793
  125,628
  132,787
  140,286
Total liabilities, $m
  27,974
  25,338
  27,654
  30,067
  32,579
  35,191
  37,906
  40,728
  43,661
  46,708
  49,876
  53,170
  56,596
  60,161
  63,872
  67,738
  71,767
  75,967
  80,348
  84,920
  89,693
  94,680
  99,890
  105,337
  111,034
  116,993
  123,229
  129,756
  136,591
  143,750
  151,249
Total equity, $m
  6,434
  8,401
  9,169
  9,969
  10,802
  11,668
  12,568
  13,504
  14,476
  15,486
  16,537
  17,629
  18,765
  19,947
  21,177
  22,459
  23,795
  25,187
  26,640
  28,156
  29,739
  31,392
  33,119
  34,925
  36,814
  38,790
  40,857
  43,022
  45,288
  47,661
  50,148
Total liabilities and equity, $m
  34,408
  33,739
  36,823
  40,036
  43,381
  46,859
  50,474
  54,232
  58,137
  62,194
  66,413
  70,799
  75,361
  80,108
  85,049
  90,197
  95,562
  101,154
  106,988
  113,076
  119,432
  126,072
  133,009
  140,262
  147,848
  155,783
  164,086
  172,778
  181,879
  191,411
  201,397
Debt-to-equity ratio
  2.440
  1.710
  1.820
  1.920
  2.000
  2.080
  2.140
  2.200
  2.260
  2.310
  2.350
  2.390
  2.430
  2.470
  2.500
  2.530
  2.560
  2.580
  2.600
  2.630
  2.650
  2.670
  2.690
  2.700
  2.720
  2.730
  2.750
  2.760
  2.770
  2.790
  2.800
Adjusted equity ratio
  0.188
  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
  3,093
  3,618
  3,912
  4,219
  4,538
  4,870
  5,214
  5,573
  5,945
  6,332
  6,734
  7,152
  7,587
  8,040
  8,511
  9,002
  9,514
  10,047
  10,604
  11,185
  11,792
  12,426
  13,088
  13,780
  14,505
  15,262
  16,055
  16,885
  17,755
  18,665
  19,619
Depreciation, amort., depletion, $m
  1,590
  1,735
  1,894
  2,059
  2,231
  2,410
  2,596
  2,789
  2,990
  3,199
  3,416
  3,641
  3,876
  4,120
  4,374
  4,639
  4,915
  5,202
  5,502
  5,815
  6,142
  6,484
  6,841
  7,214
  7,604
  8,012
  8,439
  8,886
  9,354
  9,844
  10,358
Funds from operations, $m
  5,988
  5,353
  5,806
  6,278
  6,769
  7,279
  7,810
  8,362
  8,935
  9,530
  10,149
  10,793
  11,463
  12,160
  12,885
  13,641
  14,428
  15,250
  16,106
  17,000
  17,934
  18,909
  19,928
  20,994
  22,108
  23,274
  24,494
  25,771
  27,109
  28,509
  29,977
Change in working capital, $m
  371
  68
  71
  74
  77
  80
  83
  87
  90
  93
  97
  101
  105
  109
  114
  119
  124
  129
  134
  140
  146
  153
  160
  167
  175
  183
  191
  200
  210
  219
  230
Cash from operations, $m
  5,617
  5,056
  5,735
  6,204
  6,692
  7,199
  7,727
  8,275
  8,845
  9,437
  10,052
  10,692
  11,358
  12,050
  12,771
  13,522
  14,305
  15,121
  15,972
  16,860
  17,788
  18,756
  19,769
  20,827
  21,934
  23,091
  24,303
  25,571
  26,899
  28,290
  29,747
Maintenance CAPEX, $m
  0
  -1,584
  -1,735
  -1,894
  -2,059
  -2,231
  -2,410
  -2,596
  -2,789
  -2,990
  -3,199
  -3,416
  -3,641
  -3,876
  -4,120
  -4,374
  -4,639
  -4,915
  -5,202
  -5,502
  -5,815
  -6,142
  -6,484
  -6,841
  -7,214
  -7,604
  -8,012
  -8,439
  -8,886
  -9,354
  -9,844
New CAPEX, $m
  -1,167
  -1,884
  -1,982
  -2,066
  -2,150
  -2,236
  -2,324
  -2,416
  -2,510
  -2,609
  -2,712
  -2,820
  -2,933
  -3,052
  -3,177
  -3,309
  -3,448
  -3,595
  -3,750
  -3,914
  -4,086
  -4,268
  -4,460
  -4,663
  -4,876
  -5,101
  -5,338
  -5,588
  -5,851
  -6,128
  -6,419
Cash from investing activities, $m
  -3,361
  -3,468
  -3,717
  -3,960
  -4,209
  -4,467
  -4,734
  -5,012
  -5,299
  -5,599
  -5,911
  -6,236
  -6,574
  -6,928
  -7,297
  -7,683
  -8,087
  -8,510
  -8,952
  -9,416
  -9,901
  -10,410
  -10,944
  -11,504
  -12,090
  -12,705
  -13,350
  -14,027
  -14,737
  -15,482
  -16,263
Free cash flow, $m
  2,256
  1,588
  2,018
  2,245
  2,483
  2,732
  2,993
  3,264
  3,545
  3,838
  4,142
  4,457
  4,784
  5,123
  5,474
  5,839
  6,218
  6,611
  7,019
  7,444
  7,886
  8,346
  8,825
  9,324
  9,844
  10,387
  10,953
  11,545
  12,162
  12,808
  13,483
Issuance/(repayment) of debt, $m
  2,560
  2,204
  2,316
  2,413
  2,512
  2,612
  2,715
  2,822
  2,932
  3,048
  3,168
  3,294
  3,426
  3,565
  3,711
  3,866
  4,028
  4,200
  4,381
  4,572
  4,774
  4,986
  5,211
  5,447
  5,696
  5,959
  6,236
  6,528
  6,835
  7,158
  7,499
Issuance/(repurchase) of shares, $m
  -3,456
  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  
  -971
  2,204
  2,316
  2,413
  2,512
  2,612
  2,715
  2,822
  2,932
  3,048
  3,168
  3,294
  3,426
  3,565
  3,711
  3,866
  4,028
  4,200
  4,381
  4,572
  4,774
  4,986
  5,211
  5,447
  5,696
  5,959
  6,236
  6,528
  6,835
  7,158
  7,499
Total cash flow (excl. dividends), $m
  1,274
  3,792
  4,333
  4,658
  4,995
  5,344
  5,708
  6,086
  6,478
  6,886
  7,310
  7,751
  8,210
  8,688
  9,186
  9,705
  10,246
  10,811
  11,401
  12,016
  12,660
  13,332
  14,035
  14,771
  15,540
  16,346
  17,189
  18,072
  18,997
  19,967
  20,982
Retained Cash Flow (-), $m
  1,220
  -747
  -768
  -800
  -833
  -866
  -900
  -936
  -972
  -1,010
  -1,050
  -1,092
  -1,136
  -1,182
  -1,231
  -1,282
  -1,336
  -1,393
  -1,453
  -1,516
  -1,583
  -1,653
  -1,728
  -1,806
  -1,889
  -1,976
  -2,068
  -2,164
  -2,266
  -2,373
  -2,486
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
 
  3,045
  3,566
  3,858
  4,162
  4,478
  4,808
  5,150
  5,506
  5,875
  6,259
  6,659
  7,074
  7,506
  7,955
  8,423
  8,911
  9,418
  9,948
  10,500
  11,077
  11,679
  12,308
  12,965
  13,652
  14,370
  15,121
  15,908
  16,731
  17,593
  18,496
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
 
  2,840
  3,082
  3,068
  3,021
  2,944
  2,837
  2,703
  2,544
  2,365
  2,171
  1,966
  1,756
  1,545
  1,338
  1,141
  956
  787
  636
  504
  391
  297
  221
  160
  113
  78
  52
  34
  21
  13
  8
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 21.3
Price to Sales 1
Price to Book 10.2
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 14.8
Growth Rates
Sales Growth Rate 10.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.5%
Cap. Spend. - 3 Yr. Gr. Rate 4.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 223.7%
Total Debt to Equity 244%
Interest Coverage 9
Management Effectiveness
Return On Assets 10.5%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 14.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.1%
Return On Equity 43.9%
Return On Equity - 3 Yr. Avg. 32.5%
Asset Turnover 2
Profitability Ratios
Gross Margin 34.6%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin 11.4%
EBITDA Margin - 3 Yr. Avg. 11.3%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 40.5%
Eff/ Tax Rate - 3 Yr. Avg. 39.9%
Payout Ratio 36.2%

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 2017 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 9.6% 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 91.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 846.532 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 $64.4 billion.


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COMPANY NEWS

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▶ Here Are The Key Growth Drivers For Lowe's   [Jun-15-17 02:32PM  Forbes]
▶ Lowes suppliers find home in huge renovated textile mill in Mooresville (PHOTOS)   [Jun-14-17 04:40PM  American City Business Journals]
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▶ Lowe's to lay off about 125 workers, move jobs to India   [Jun-07-17 03:11PM  Associated Press]
▶ These Stocks Have Changed Direction   [12:00PM  TheStreet.com]
▶ This Just Lowered Lowes Valuation Multiple   [09:06AM  Market Realist]
▶ What Caused Lowes Earnings to Rise in 1Q17?   [07:36AM  Market Realist]
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▶ This Drove Lowes Revenue in 1Q17   [04:36PM  Market Realist]
▶ Why Lowes Stock Is Now in Decline   [03:03PM  Market Realist]
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▶ Lowe's to Webcast Annual Meeting of Shareholders   [May-26-17 04:30PM  PR Newswire]
▶ Consumer Staples Sink and Soar This Week   [11:07AM  Investopedia]
▶ Sears Skyrockets, Lowes and Chicos Plunge   [May-25-17 03:57PM  Investopedia]
▶ Company News for May 25, 2017   [10:29AM  Zacks]
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▶ Takeaways from Lowe's first-quarter earnings call   [12:00AM  American City Business Journals]
▶ Cramer: An Evening of Drinks and Extremes   [May-24-17 07:01PM  TheStreet.com]
▶ Lowe's Guides Low Amid Weak Q1 Results, Housing Data   [04:09PM  Investor's Business Daily]
▶ Retail And E-Commerce News And Stocks To Watch   [02:39PM  Investor's Business Daily]
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▶ Why Lowes Q1 Earnings Fell Short   [09:05AM  24/7 Wall St.]
▶ Stock dips as Lowe's misses the mark on sales, earnings   [08:21AM  American City Business Journals]
▶ Lowe's Expected to Hike Dividend Next Week   [May-23-17 01:37PM  Barrons.com]
▶ Lowe's Earnings Could Beat Expectations   [01:00PM  TheStreet.com]
▶ Jim Cramer -- Lowe's Earnings Should Be Good   [12:33PM  TheStreet.com]
Stock chart of LOW Financial statements of LOW Annual reports 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.

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