LOWE’S COMPANIES, INC. (LOW): what the price requires
The current priced-in claim for LOWE’S COMPANIES, INC. (LOW) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/LOW
Headline
| Field | Value |
|---|---|
| Ticker | LOW |
| Company | LOWE’S COMPANIES, INC. |
| Current price | $207.17/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.7% |
| Operating margin today | 12.4% |
| Margin compression implied | -7.7pp |
| Multiple paid | 15x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7.1% cost of capital with 4% terminal growth over a 5-year stage.
Reconcile: at the x-ray's 9.3% required return this reads ~6.6%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.75σ |
| cohort percentile (of 210 peers) | 31 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | — | 0 | — |
| Earnings | 1.54x | 3 | expensive |
| Relative | 0.71x | 2 | justifies |
| Growth | — | 0 | — |
Families that justify the price: Relative Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.
Per-Model Detail (n=5)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $304.57 | 0.68x | no | FCF base $7.9B, growth 6% (input: historical growth), terminal g 4.0%, WACC 9.0%, 5yr projection |
| DCF Exit Multiple | Growth | $240.15 | 0.86x | no | Exit EV/EBITDA: 7.6x / 9.6x / 11.6x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $279.36 | 0.74x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.8x / 20.0x / 23.2x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | — | — | no | — |
| Two-Stage Excess Return | Asset | — | — | no | — |
| Discounted Future Market Cap | Growth | $173.62 | 1.19x | no | Rev $88.4B, growth 6% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.3x / 1.5x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $167.27 | 1.24x | no | Normalized EBIT (5y avg op income, one-time charges added back) $11.16B × (1−24%) / WACC 9.0% → EPV (no growth) |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $306.11 | 0.68x | yes | EBITDA $12.54B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $139.60 | 1.48x | yes | FCF $7619.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $134.69 | 1.54x | yes | SBC-adj FCF $7.37B (FCF $7.62B − SBC $0.25B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $17.80 | 11.64x | yes | EPS $11.83 × (8.5 + 2×-3.4%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $236.88 | 0.87x | no | Revenue $88.43B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $127.89 | 1.62x | no | EPS $11.83 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $39.3b |
| Net debt / NOPAT (after-tax) | 4.74x |
| Net debt / operating income (pre-tax) | 3.58x |
| Share count CAGR (buyback) | -4.1% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Lowe's negative book equity is the footprint of years of heavy buybacks, not distress: the share count falls about 4% a year, concentrating each dollar of profit into fewer shares while the company hands back more cash than it retains.
- The single biggest risk is a stalled housing cycle: first-quarter comparable sales grew just 0.6% and the full-year guide tops out at +2%, so the thesis depends on a residential recovery that management does not control.
- Watch the Foundation Building Materials and Artisan Design Group integration and the Pro channel: the contractor-distribution push is the lever that could lift Lowe's toward recurring, volume-driven economics ahead of any homebuilding rebound.
Bull Case
The number that ought to scare a buyer at 19x earnings is the one that explains the bull case. Lowe's book equity is negative. The company has, over years, bought back so much of its own stock that the cumulative dividends and repurchases now exceed the equity it has retained. A naive screen reads that as fragility. It is the opposite: it is the signature of a business that throws off far more cash than it needs to run, and has been handing the surplus back rather than letting it pile up on the balance sheet. The share count has fallen about 4% a year. Each dollar of profit is now spread across fewer shares than the year before, which is the quiet engine under the per-share numbers.
The operating business behind that capital return is steadier than the housing headlines suggest. First quarter sales reached $23.1 billion with comparable sales up 0.6%, online sales up 15.5%, and continued strength in appliances, home services, and the professional contractor channel. The Pro customer is the lever. Lowe's 10-K frames the long-run demand setup directly, citing "strong millennial household formation" and the aging of the US housing stock as the structural drivers of home-improvement spend. Roughly half the country's homes are over forty years old; they do not stop needing roofs, water heaters, and renovation regardless of where mortgage rates sit. That is a maintenance-driven floor under a business the market is pricing for outright decline.
The two recent acquisitions extend the reach into the contractor's job site rather than the homeowner's weekend. Foundation Building Materials and Artisan Design Group cost $96 million in integration expense in the quarter, and management positioned both as ways to capture the residential homebuilding recovery when it arrives. The peer set is instructive here. Builders FirstSource and Sherwin-Williams sit in the same construction-and-renovation cohort, and the Pro-distribution push moves Lowe's toward the recurring, volume-driven economics those names live on. The company affirmed full-year sales of $92 to $94 billion and operating margin of 11.2% to 11.4%, which says management sees the spring momentum holding rather than fading. Hold that margin and keep retiring shares, and the per-share line compounds even if the top line barely moves.
Bear Case
The methods do not agree on what Lowe's is worth, and the disagreement is the bear case. The relative-multiple lens, which prices the company against its sector, reads the stock as roughly fairly valued: a 20x sector P/E puts the implied value near $279, and the EV/EBITDA comparison lands higher still. The earnings-power lens reads it very differently. Capitalize the actual free cash flow the business generates at its cost of equity and the price sits about 60% above what that cash stream supports on its own. The honest reading is that the bull is leaning entirely on the multiple staying where peers trade, not on the cash flow justifying the price. If sentiment toward home-improvement retail compresses that multiple, there is no earnings-power floor underneath to catch it.
The operating story has a soft center. Comparable sales grew 0.6% in the first quarter, which is positive but barely, and the full-year guide of flat to up 2% comps describes a business treading water while it waits for a housing recovery it does not control. The 10-K is blunt about the dependence, naming "real disposable personal income, and housing turnover" among the forces that drive demand. Housing turnover has been weak, and big-ticket discretionary projects, the kitchen remodel, the deck rebuild, get deferred when households feel the rate pinch. Management itself flags the risk that it "may be unable to adapt our business concept in a rapidly evolving retail environment", the polite version of admitting that the contractor channel and online execution have to keep working for the thesis to hold.
The balance sheet is where the buyback strategy cuts both ways. Net debt sits near $39 billion, about four times trailing operating income, and interest expense is not separately broken out in the latest filings, so the coverage cushion is not visible from the financials. That leverage is the cost of having returned so much capital: the same buybacks that flatter per-share earnings have left thin equity and real debt service to carry through a downturn. Wall Street has noticed the tension. Recent price-target cuts from RBC to $232, Evercore to $230, and Bank of America to $257 all came with non-Buy ratings. The bear does not need Lowe's to break. It needs the housing recovery to stay one more year out while the multiple drifts toward what the cash flow alone would pay for.
Valuation
Start with what the price is actually betting, because it is unusual. At today's level the market pays about 15x company-wide operating income, and inverting that back into an assumption implies operating profit need not grow at all, roughly negative 4% a year over the next five years, for the price to make sense. The bet is not on acceleration. It is on durability: that Lowe's holds its current profitability while it keeps shrinking the share count, and that the home-improvement cycle does not get materially worse from here. Against the company's own recent results, that near-term pace is well within what it has delivered. The stretch is in how long the steadiness must persist, not in the rate.
The methods split cleanly into two camps, and the split is the whole picture. Price the company against its sector and it looks reasonable: a 20x peer P/E reaches about $279 and the EV/EBITDA comparison lands higher, both within range of the current price. Price it on the cash it generates, with no help from the multiple, and it looks expensive: the free-cash-flow methods, capitalizing roughly $7.6 billion of free cash flow at the cost of equity, land near $135 to $140, well below the price. The relative lens defends the stock; the earnings-power lens does not. A reader should take that as the precise shape of the bet, which is that today's price holds only if the market keeps awarding Lowe's a multiple in line with its retail peers rather than reverting to what the cash stream alone would justify.
Solvency frames the downside honestly. The negative book equity is an artifact of years of returning more cash than the company retained, not a sign of operating trouble, and the falling share count is the same buyback program showing up where it cannot be faked. The cost of that strategy is leverage: net debt near $39 billion against trailing operating income of about $10.2 billion. The business is not burning cash, and the spring quarter showed the operating engine still running, but the thin equity and real debt load mean a prolonged housing slump would be felt more sharply here than at a peer carrying net cash.
Catalysts
The first quarter, reported May 20, set the near-term tone. Sales rose to $23.1 billion against $20.9 billion a year earlier, helped by the recent acquisitions, with comparable sales up 0.6%, online sales up 15.5%, and strength in appliances, home services, and Pro. GAAP diluted EPS was $2.90, essentially flat against $2.92 a year prior, with $96 million of integration expense from Foundation Building Materials and Artisan Design Group weighing on the reported figure. Management affirmed full-year guidance of $92 to $94 billion in sales, flat to up 2% comparable sales, and operating margin of 11.2% to 11.4%.
Analyst sentiment has cooled into the summer even as the consensus stays constructive. RBC trimmed its target to $232 with a Sector Perform rating, Evercore to $230 at In Line, and Bank of America to $257 at Neutral, all citing the muted housing backdrop. Citi moved the other way, upgrading to Buy on the Total Home strategy's ability to capture discretionary spend in a sluggish housing market, and Goldman Sachs reaffirmed a Buy on resilient Pro-segment sales. The next set-piece is the integration of the two acquisitions and the cross-selling into the contractor channel, where the early synergy capture will tell investors whether the homebuilding-recovery bet is on schedule.
Peer Cohorts (Per Segment, With Filing Citations)
Home improvement retail (single reportable segment) (reported)
- HD (HOME DEPOT, INC.)
- (no filing in the citation store)
- TSCO (TRACTOR SUPPLY CO /DE/)
- (no filing in the citation store)
- SHW (THE SHERWIN-WILLIAMS COMPANY)
- (no filing in the citation store)
- BLDR (Builders FirstSource, Inc.)
- (no filing in the citation store)
- FND (Floor & Decor Holdings, Inc.)
- (no filing in the citation store)
- FAST (FASTENAL CO)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Lowe's Q1 FY2026 earnings release, May 20, 2026 · analyst notes, June 2026