U.S. Markets close in 4 hrs 14 mins

Lowe’s Companies, Inc. (NYSE:LOW): Is It A Smart Long Term Opportunity?

Simply Wall St

As Lowe’s Companies, Inc. (NYSE:LOW) announced its earnings release on 01 February 2019, analysts seem highly optimistic, with profits predicted to ramp up by an impressive 99% next year, relative to the previous 5-year average growth rate of 7.6%. Currently with trailing-twelve-month earnings of US$2.3b, we can expect this to reach US$4.6b by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Lowe’s Companies in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Lowe’s Companies

What can we expect from Lowe’s Companies in the longer term?

Over the next three years, it seems the consensus view of the 27 analysts covering LOW is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of LOW’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NYSE:LOW Past and Future Earnings, March 1st 2019

This results in an annual growth rate of 15% based on the most recent earnings level of US$2.3b to the final forecast of US$5.4b by 2022. EPS reaches $8.15 in the final year of forecast compared to the current $2.84 EPS today. With a current profit margin of 3.2%, this movement will result in a margin of 7.0% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Lowe’s Companies, I’ve compiled three important factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Lowe’s Companies worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Lowe’s Companies is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lowe’s Companies? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.