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Lowe's Companies, Inc. (LOW) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Lowe's Companies, Inc. (LOW)

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Intrinsic Value (DCF)

Current$270.89
→
Intrinsic$321.32
+19%
$193.13$321.32$576.26
Market implies 14% growth for 5 years
LOW shows 19% potential upside using 17% growth — reasonable if fundamentals hold.
At $271, the market prices in 14% annual cash flow growth — a moderate expectation aligned with historical trends (17%).
Range: Bear $193 → Bull $576. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →13%15%17%19%
8%$418$460$504$551
10%$264$292$321$353
12%$183$203$225$248
14%$133$149$166$184

Bull Case

  • Bull case ($576) offers 113% upside at 21% growth, 8% discount
  • 16% margin of safety vs. base case estimate
  • Market-implied growth (14%) ≤ historical CAGR (17%)

Bear Case

  • Bear case ($193) implies 29% downside at 14% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$9.04B
Year 2$10.61B
Year 3$12.45B
Year 4$14.61B
Year 5$17.15B
Terminal$271.74B

📐 Model Inputs

Growth Rate17.4%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$7.70BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is LOW stock undervalued or overvalued?
🟢 UNDERVALUED

LOW trades at $270.89 vs. our DCF-derived intrinsic value of $286.60, implying +16% upside. At a 9.5% WACC and 17.4% projected FCF growth, the market appears to be underpricing the present value of LOW's future cash flows. The bear case ($170.03) still suggests upside, providing margin of safety.

What is LOW's intrinsic value?

Using a 5-year DCF model: Base FCF of $7.70B, projected at 17.4% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $37.92B net debt and dividing by 0.57B shares: Bear $170.03 | Base $286.60 | Bull $457.46. Current price $270.89 implies +16% to base case.

How is LOW's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 17.4% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($200.55B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.