As of December 14, 2017, Lowe’s (LOW) was trading at $85.58. On the same day, analysts expected the company’s stock price to reach $87.93 in the next 12 months, which represents a return potential of 2.8%.
The strong 3Q17 performance and the expectations of sales growth due to continued recovery efforts after the hurricanes appear to have compelled analysts to raise their target price. Before the announcement of Lowe’s 3Q17 earnings, analysts forecast a target price of $85.68.
Of the 33 analysts that follow Lowe’s, 57.6% recommend a “buy,” 38.4% recommend a “hold,” and 3.0% recommend a “sell.” On November 26, 2017, Raymond James raised the stock from “market perform” to “outperform.” Currently, Lowe’s is trading below analysts’ target price. However, it doesn’t mean an automatic “buy.” Investors should analyze the various parameters discussed in this series before making any investment decisions.
The target price and return potential of Lowe’s peers are as follows:
- Home Depot (HD) – target price of $189.36 with a return potential of 4.0%
- Williams-Sonoma (WSM) – target price of $49.35—a fall of 2.1% from its current stock price
- Bed Bath & Beyond (BBBY) – target price of $23.88 with a return potential of 6.3%
The valuation multiple helps investors assess comparable companies. For our analysis, we considered the forward PE (price-to-earnings) multiple. On December 14, 2017, Lowe’s was trading at a forward PE multiple of 16.9x. On the same day, its peers Home Depot, Williams-Sonoma, and Bed Bath & Beyond were trading at 22.2x, 13.5x, and 8.0x, respectively.