Is Lowe’s (LOW) Priced Right After Recent Share Pullback And DCF Valuation Premium
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If you are wondering whether Lowe’s Companies is priced attractively right now, this article will walk through what the current share price might be saying about value.
The stock last closed at US$264.57, with returns of 7.2% year to date and 8.6% over the past year, alongside a 5.6% decline over the last week and a 1.8% decline over the last month.
Recent news on Lowe’s has focused on its position as a major home improvement retailer and how investor expectations line up with broader consumer spending trends. This context helps frame why the share price has moved recently, as the market continuously reassesses the balance between resilience in home improvement demand and any changing sentiment around the sector.
Lowe’s currently has a valuation score of 1 out of 6. This means it screens as undervalued on only one of six checks. Next we will look at what different valuation methods say about that score and hint at an even more complete way to think about value later in the article.
Lowe’s Companies scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts them back to today’s value using a required rate of return. The idea is to estimate what those future dollars are worth in today’s terms.
For Lowe’s Companies, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about US$7.81b. Analysts provide free cash flow estimates out to 2029, with a projected free cash flow figure of US$8.23b in that year. Beyond those analyst inputs, Simply Wall St extrapolates further free cash flow projections out to 2035 using more moderate growth assumptions.
When all of those projected cash flows are discounted back and combined, the DCF model arrives at an estimated intrinsic value of about US$230.03 per share. Compared with the recent share price of US$264.57, the model suggests Lowe’s Companies trades at roughly a 15.0% premium to this DCF estimate, which points to the shares being overvalued on this specific cash flow view.
For a profitable company like Lowe’s Companies, the P/E ratio is a useful way to see how much investors are paying for each dollar of earnings. A higher or lower P/E often reflects what the market expects for future growth and how much risk investors see in those earnings.
In general, stronger growth and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower “normal” P/E range. Lowe’s currently trades on a P/E of 22.36x. That sits above the Specialty Retail industry average of 20.06x, yet below the peer group average of 31.58x, which indicates the market is not pricing it at the top of its peer range.
Simply Wall St’s Fair Ratio for Lowe’s is 22.30x. This is a proprietary estimate of what the P/E “should” be, based on factors such as earnings growth, industry, profit margins, market cap and specific risks. Because it blends these company specific drivers, it can be more informative than a simple comparison with peers or the broad industry. With the current P/E of 22.36x sitting very close to the Fair Ratio, the market price appears broadly in line with this framework.
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you tell your story about Lowe’s Companies by setting your own assumptions for future revenue, earnings, margins and a fair value. The platform then turns that story into a full forecast and compares your fair value with the current price to help you decide whether the stock looks attractive or expensive to you. It also keeps that view updated as new news or earnings arrive. This allows you to see, for example, how one investor might build a higher fair value closer to the US$325.00 bullish target based on stronger housing and AI adoption, while another might anchor nearer the US$221.00 bearish target because they focus more on acquisition risks, debt and slower sales, all within a single, easy to use framework.
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.
