DCF Studio

    LOW · NYQ · Consumer Cyclical

    Lowe's Companies, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 120.28

    Market price

    USD 192.49

    Implied upside

    -37.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 120.28-37.5%
    Exit multiple
    USD 133.81-30.5%
    Market price
    USD 192.49

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn8bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 83.0bnUSD 79.8bnUSD 76.7bnUSD 73.8bnUSD 70.9bn-3.8%
    EBITUSD 10.0bnUSD 9.6bnUSD 9.2bnUSD 8.9bnUSD 8.5bn-3.8%
    NOPATUSD 7.9bnUSD 7.6bnUSD 7.3bnUSD 7.0bnUSD 6.7bn-3.8%
    Add depreciation & amortisationUSD 1.9bnUSD 1.8bnUSD 1.8bnUSD 1.7bnUSD 1.6bn-3.8%
    Less capital expenditureUSD -1.9bnUSD -1.8bnUSD -1.7bnUSD -1.7bnUSD -1.6bn-3.8%
    Less increase in working capitalUSD 142.3mUSD 136.8mUSD 131.6mUSD 126.5mUSD 121.6m+3.8%
    Free cashflow to firmUSD 8.1bnUSD 7.7bnUSD 7.4bnUSD 7.2bnUSD 6.9bn-3.8%
    Discount factor0.96140.88880.82150.75940.7020-
    Present valueUSD 7.7bnUSD 6.9bnUSD 6.1bnUSD 5.4bnUSD 4.8bn-11.1%
    Present Value Of The ForecastUSD 31.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.897Reported 0.846, pulled toward 1.0 (Blume)
    Cost of equity9.93%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 108.0bn70.7% of capital
    Total debtUSD 44.7bn29.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.18%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 120.28

    72% of EV

    Forecast FCFF, final year
    USD 6.9bn
    Capex at depreciation, working capital in reinvestment
    USD 6.7bn
    Less reinvestment at g/ROIC (6.3% of NOPAT)
    USD -423.3m
    Capitalised
    USD 6.3bn
    ROIC (reported)
    39.8%
    Terminal value, undiscounted
    USD 114.0bn
    Terminal value, discounted
    USD 80.0bn
    Enterprise value
    USD 111.1bn
    Less net debt
    USD 43.7bn
    Equity value
    USD 67.4bn

    Exit at 12.3x EBITDA

    Value per shareUSD 133.81

    74% of EV

    Terminal value, undiscounted
    USD 124.8bn
    Terminal value, discounted
    USD 87.6bn
    Enterprise value
    USD 118.6bn
    Less net debt
    USD 43.7bn
    Equity value
    USD 74.9bn

    Spread between methods: 11%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.18%171.59192.77219.68255.01303.49
    7.18%130.06143.33159.40179.29204.56
    8.18%100.93109.83120.28132.73147.81
    9.18%79.3485.6292.82101.17110.97
    10.18%62.7067.2972.4778.3585.10

    Outlined: this model. Green text: above today's price of 192.49. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-3.8%3.3%+7.2pp
    EBIT margin12.0%16.4%+4.4pp
    Discount rate8.2%6.6%-1.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.