Lowe's Companies, Inc. (LOW) — DCF Valuation

Discounted Cash Flow intrinsic value with Bear, Base & Bull scenarios

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Lowe's Companies, Inc. (LOW)

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Intrinsic Value (DCF)

Current$264.57

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Intrinsic$344.85

+30%

$227.46$344.85$578.39

Market implies 9% growth for 5 years

Growth 15%

Discount 10%

Terminal 3%

DCF analysis suggests LOW could have 30% upside at 15% growth — verify assumptions match your view.

At $265, the market prices in 9% annual cash flow growth — a moderate expectation aligned with historical trends (15%).

Range: Bear $227 → Bull $578. Current price implies expectations below the base case, but well above the bear case.

Discount ↓Growth →	11%	13%	15%	17%
8%	$431	$470	$511	$555
10%	$292	$317	$345	$374
12%	$218	$237	$257	$279
14%	$173	$187	$203	$220

Bull Case

Bull case ($578) offers 119% upside at 18% growth, 8% discount
23% margin of safety vs. base case estimate
Market-implied growth (9%) ≤ historical CAGR (15%)

Bear Case

Bear case ($227) implies 14% downside at 12% growth, 12% discount

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5-Year Free Cash Flow Projection

Year 1$8.80B

Year 2$10.12B

Year 3$11.64B

Year 4$13.38B

Year 5$15.39B

Terminal$243.85B

📐 Model Inputs

Growth Rate15.0%5Y CAGR (cascade: 5Y→3Y→TTM)

Discount Rate9.5%WACC estimate

Terminal Growth3.0%Perpetuity rate

Base Free Cash Flow$7.65BTTM 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.

Frequently Asked Questions

Is LOW stock undervalued or overvalued?

🟢 UNDERVALUED

LOW trades at $264.57 vs. our DCF-derived intrinsic value of $286.60, implying +16% upside. At a 9.5% WACC and 15.0% 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 $7.65B, projected at 15.0% 5Y CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap), 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 $6.21B net debt and dividing by 0.56B shares: Bear $170.03 | Base $286.60 | Bull $457.46. Current price $264.57 implies +16% to base case.

How is LOW's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 15.0% 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 ($166.70B).

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: 21.8x.

Our Methodology

Institutional-grade research documentation

DCF Intrinsic Value Methodology

Eligibility gates, reinvestor-aware FCF normalization, WACC logic, and sensitivity analysis.

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Lowe's Companies, Inc. (LOW) — DCF Valuation