Lowes Companies Inc. (LOW) Fundamental Valuation using Analyst Forecast Data

I used the Stockcalc website (www.stockcalc.com) to run a fundamental analysis for Lowes Companies (LOW:NYS)

I ran a Weighted Average Cost of Capital with the WACC Tool
I loaded the Analyst Estimate Data and used it to generate an Income Statement Forecast for 2016 to 2018
I then ran a Discounted Cash Flow with that Data.

The following screens show the steps:

Calculation of WACC for LOW:NYS

Lowes Companies WACC
The weighted average cost of capital for Lowes Companies (LOW:NYS)

This resulted in a WACC value of 8.78 for Lowes Companies Inc.

Next I loaded the Analyst Estimate Data and used it to generate an Income Statement Forecast for 2016 to 2018

LOW Analyst Estimates
Average Analyst Estimates for Lowes Companies Inc. (LOW:NYS)


LOW:NYS Income Statement
Income Statement Forecast for Lowes Companies Inc. (LOW:NYS)


I then loaded a Discounted Cash Flow using the above inputs

Discounted Cash Flow Analysis for Lowes Companies (LOW:NYS)

Note – Stockcalc provides default or historic values to generate the initial valuation calculation- the user can then adjust based on their expectations:

The cash flow values were taken directly from the Analyst estimates.  I reviewed the historic Capex figures and adjusted the ongoing Capital Expenditures to 0.9 billion from an average of 1.2 billion last 5 years based predominately on the last 2 years figures of 0.9 and 0.8 billion.  I also adjusted the terminal growth rate from the default of 3.0 to 3.4 given the Analyst projection for the next 3 years are 11% growth in EBITDA. These 2 adjustments resulted in a value of $74 per share.  I am not aware if there are redundant assets that would add to  company value.

The Analyst Mean Target Price for 2017 is $80.86.  This can be seen on the Average Analyst Estimates above.  To achieve that value I would need to increase the terminal value to 4.0 % per year in the discounted cash flow model.

Company Information:
Lowe’s Companies Inc. was incorporated in North Carolina in 1952 and has been publicly held since 1961. It is a Fortune(r) 100 company and a home improvement retailer. As of January 31, 2014, Lowe’s operated 1,832 home improvement and hardware stores in the United States, Canada and Mexico representing approximately 200 million square feet of retail selling space. The Company serves homeowners, renters and commercial business customers (Pro customer).

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