Today I will take a look at Lowe’s Companies Inc’s (NYSE:LOW) most recent earnings update (03 November 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the specialty retail industry performed. As an investor, I find it beneficial to assess LOW’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Lowe’s Companies
Did LOW’s recent earnings growth beat the long-term trend and the industry?
I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to analyze different stocks on a more comparable basis, using the most relevant data points. For Lowe’s Companies, its most recent trailing-twelve-month earnings is US$3.53B, which, against the prior year’s figure, has jumped up by 42.90%. Given that these values are somewhat myopic, I have created an annualized five-year value for LOW’s net income, which stands at US$2.42B This means on average, Lowe’s Companies has been able to steadily improve its net income over the past few years as well.
What’s the driver of this growth? Let’s take a look at if it is solely due to an industry uplift, or if Lowe’s Companies has seen some company-specific growth. Over the past few years, Lowe’s Companies expanded its bottom line faster than revenue by efficiently controlling its costs. This has caused a margin expansion and profitability over time. Scanning growth from a sector-level, the US specialty retail industry has been growing, albeit, at a subdued single-digit rate of 8.25% over the previous year, and 6.31% over the past half a decade. This suggests that any uplift the industry is enjoying, Lowe’s Companies is capable of amplifying this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Lowe’s Companies gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Lowe’s Companies to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for LOW’s future growth? Take a look at our free research report of analyst consensus for LOW’s outlook.
- 2. Financial Health: Is LOW’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 03 November 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.