Balance sheet analysis
Lowe’s Companies’ total assets were $41.8 billion and $43.7 billion as of February 2, 2024 and as of February 3, 2023, respectively.
Property was $17.65 billion at February 2, 2024, accounting for 42.2% of total assets.
Total current assets were $19 billion, consisting of 45.5% of total asset.
Among total current assets, merchandise inventory, net was $16.9 billion at February 2, 2024, constituting 40.4% of total assets.
Among total current assets, the combined amount of cash, cash and equivalents, and short-term investments was about $1.2 billion at February 2, 2024.
Total current liabilities were $15.6 billion at February 2, 2024.
The current ratio was 1.2 times for fiscal 2023.
Total liabilities were $56.8 billion at February 2, 2024.
The debt ratio was 136% for fiscal 2023.
Usually, companies with high debt generate a lot of cash flow, which could service debt.
Cash flow is very important to maintain debt.
Profitability analysis
Lowe’s Companies net sales were $86.4 billion, $97 billion and $96.3 billion in fiscal 2023, in fiscal 2022 and fiscal 2021, respectively.
Gross margin was 33.39%, 33.32% and 33.3% in fiscal 2023, in fiscal 2022 and in fiscal 2021, respectively.
Net sales in fiscal 2023 were down 10.9% year-on-year.
Net sales in fiscal 2022 were up 7.3% year-on-year.
Operating income was $11.6 billion, $10.16 and $12.1 billion in fiscal 2023,in fiscal 2022 and fiscal 2021, respectively.
The operating profit margin was 13.38%, 10.47% and 12.56% in 2023， 2022 and2021，respectively.
Net earnings were $7.73 billion, $6.44 billion and $8.44% in 2023, 2022 and 2021, respectively.
The net profit margin was 8.95%, 6.63% and 8.77% in fiscal 2023, 2022 and 2021, respectively.
The Home Depot’s operating profit margin was 14.2%, 15.2% and 15.2% in fiscal 2023, 2022 and 2021, respectively.
The Home Depot’s net profit margin was 9.9%, 10.9% and 10.8% in fiscal 2023, 2022 and 2021, respectively.
We could see that neither operating profit margin or net income margin, Lowe’s companies is lower than The Home Depot.
Cash flow analysis
Net cash provided by operating activities was $8.14 billion, $8.59 billion and $10.1 billion in fiscal 2023, 2022 and 2021, respectively.
Capital expenditures were $2 billion, $1.83 billion and $1.85 billion in fiscal 2023, 2022 and 2021, respectively.
The company’s free cash flow was $6.14 billion, $6.76 billion and $8.25 billion in fiscal 2023, 2022 and 2021, respectively.
Cash dividends payments were $2.5 billion, $2.4 billion and $2 billion in fiscal 2023, 2022 and 2021, respectively.
Repurchases of common stock were $6.14 billion, $14.1 billion and $13 billion in fiscal 2023, 2022 and 2021, respectively.
Apparently, the combined amount of cash dividends and repurchases of common stock per year has been more than amount of free cash flow per year in the past three years, which is unusual.
You could see that net proceeds from issuance of debt was $3 billion, $9.7 billion and $5 billion in fiscal 2023, 2022 and 2021, respectively.
As you can see, the company has repurchased stock by adding debt.
We don’t courage the company to repurchase stock by adding debt.
Actually, cash returned to shareholders should’ t have been more than the amount of free cash flow.
Conclusion
Lowe’s companies’ stock price is $227.92 per share , which is equivalent to $130.45 billion in market capitalization.
We reckon that the reasonable valuation is $60 billion to $80 billion, which is equivalent to $104.9 per share to $139.9 per share.
Disclaimer: The content is for reference only and does not constitute investment advice.
Introduction
Lowe’s Companies, Inc. and subsidiaries (the Company or Lowe’s) is a Fortune® 50 company and the world’s second largest home improvement retailer. As of February 2, 2024, Lowe’s operated 1,746 home improvement stores and outlets in the United States, representing approximately 195 million square feet of retail selling space.
Lowe’s was founded in 1921 with the opening of its first hardware store in North Wilkesboro, North Carolina. The Company was incorporated in North Carolina in 1952 and has been publicly held since 1961. The Company’s common stock is listed on the New York Stock Exchange – ticker symbol “LOW”.
