Lowe’s Valuation Multiple Compared to Home Depot


Jul. 1 2019, Updated 4:52 p.m. ET

Valuation multiple

Lowe’s (LOW) stock price has increased 7.6% since the beginning of 2019, which increased its valuation multiple. As of June 27, the company is trading at a forward PE ratio of 16.6x compared to 15.5x at the beginning of 2019. Home Depot (HD) was trading at a forward PE ratio of 19.8x as of June 27.

In the following graph, you can see that Lowe’s has been trading at a lower valuation multiple than Home Depot. The strong SSSG (same-store sales growth) and higher margins have allowed Home Depot to trade at a higher valuation multiple than Lowe’s.

On June 27, Lowe’s was trading at 17.8x analysts’ 2019 EPS estimate of $5.57 and at 15.1x analysts’ 2020 EPS estimate of $6.59. The company’s EPS expected to rise 9.2% in 2019 and 18.4% in 2020.

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Analysts’ recommendations

Lowe’s lower-than-expected first-quarter EPS and lower guidance appear to have prompted analysts to lower their target prices. Since Lowe’s reported its first-quarter earnings, SunTrust Robinson, UBS, Baird, Wedbush, Citigroup, RBC, Raymond James, Telsey Advisory Group, Jefferies, and Barclays have all lowered their target price.

Overall, analysts rate Lowe’s as “buy.” For the stock, 68.8% of the 32 analysts that follow Lowe’s recommended a “buy” rating, while the remaining 31.2% recommended a “hold” rating. On average, analysts have given Lowe’s a 12-month target price of $113.83, which implies a return potential of 14.6% from its stock price of $99.36.

Since Home Depot reported its first-quarter earnings on May 21, its stock has gained upward momentum. Read Will Home Depot’s Upward Momentum to Continue to learn more.


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