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Is Lowe's Companies (LOW) Stock a Suitable Value Pick Now?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Lowe's Companies, Inc. (LOW - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Lowe's Companies has a trailing twelve months PE ratio of 19.6, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 21.1. If we focus on the long-term PE trend, Lowe's Companies’ current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with its industry’s trailing twelve months PE ratio, which stands at 23.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Lowe's Companies has a forward PE ratio (price relative to this year’s earnings) of just 15.7, so it is fair to say that a slightly more value-oriented path may be ahead for Lowe's Companies stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Lowe's Companies has a P/S ratio of about 1.0. This is lower than the S&P 500 average, which comes in at 3.4 right now. As we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Lowe's Companies currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Lowe's Companies a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Lowe's Companies is just 0.9, a level that is lower than the industry average of 1.3. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, LOW is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lowe's Companies might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of D and a Momentum score of F. This gives LOW a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite encouraging. The current fiscal quarter has seen eight estimates go higher in the past sixty days compared to only one lower, while the fiscal full year estimate has seen twelve upward and three downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current fiscal quarter consensus estimate has risen by 7.4% in the past two months, while the fiscal full year estimate has increased 4.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Lowe's Companies is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Lowe's Companies is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 42%) should boost investor confidence.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has slightly underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Lowe's Companies.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Is Lowe's Companies (LOW) Stock a Suitable Value Pick Now?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Lowe's Companies, Inc. (LOW - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Lowe's Companies has a trailing twelve months PE ratio of 19.6, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 21.1. If we focus on the long-term PE trend, Lowe's Companies’ current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with its industry’s trailing twelve months PE ratio, which stands at 23.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Lowe's Companies has a forward PE ratio (price relative to this year’s earnings) of just 15.7, so it is fair to say that a slightly more value-oriented path may be ahead for Lowe's Companies stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Lowe's Companies has a P/S ratio of about 1.0. This is lower than the S&P 500 average, which comes in at 3.4 right now. As we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
As we can see, the stock is trading at its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Lowe's Companies currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Lowe's Companies a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Lowe's Companies is just 0.9, a level that is lower than the industry average of 1.3. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, LOW is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Lowe's Companies might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of D and a Momentum score of F. This gives LOW a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite encouraging. The current fiscal quarter has seen eight estimates go higher in the past sixty days compared to only one lower, while the fiscal full year estimate has seen twelve upward and three downward revisions in the same time period.
This has had a meaningful impact on the consensus estimate as the current fiscal quarter consensus estimate has risen by 7.4% in the past two months, while the fiscal full year estimate has increased 4.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Lowe's Companies, Inc. Price and Consensus
Lowe's Companies, Inc. Price and Consensus | Lowe's Companies, Inc. Quote
The stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Lowe's Companies is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Lowe's Companies is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 42%) should boost investor confidence.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has slightly underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Lowe's Companies.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>