Stock Analysis on Net
Stock Analysis on Net

Lowe’s Cos. Inc. (NYSE:LOW)

Economic Value Added (EVA)

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EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit

Lowe’s Cos. Inc., economic profit calculation

US$ in millions

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12 months ended: Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016
Net operating profit after taxes (NOPAT)1 7,037  4,824  3,118  4,276  3,915  3,139 
Cost of capital2 12.49% 10.75% 12.64% 11.89% 12.00% 12.38%
Invested capital3 28,603  26,805  24,933  27,890  27,262  24,562 
 
Economic profit4 3,464  1,943  (33) 960  643  98 

Based on: 10-K (filing date: 2021-03-22), 10-K (filing date: 2020-03-23), 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 7,037 – 12.49% × 28,603 = 3,464

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Lowe’s Cos. Inc.’s economic profit increased from 2019 to 2020 and from 2020 to 2021.

Net Operating Profit after Taxes (NOPAT)

Lowe’s Cos. Inc., NOPAT calculation

US$ in millions

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12 months ended: Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016
Net earnings 5,835  4,281  2,314  3,447  3,093  2,546 
Deferred income tax expense (benefit)1 (99) 139  (157) 56  9  (63)
Increase (decrease) in deferred revenue2 514  (13) (55) 165  209  98 
Increase (decrease) in accrual for exit activities3 (19) (273) 301  (6) (1) 14 
Increase (decrease) in equity equivalents4 396  (147) 89  215  217  49 
Interest expense, net of amount capitalized 872  718  652  649  657  556 
Interest expense, operating lease liability5 172  182  281  294  286  285 
Adjusted interest expense, net of amount capitalized 1,044  900  933  943  943  841 
Tax benefit of interest expense, net of amount capitalized6 (219) (189) (196) (318) (330) (294)
Adjusted interest expense, net of amount capitalized, after taxes7 825  711  737  625  613  547 
Interest income (24) (27) (28) (16) (12) (4)
Investment income, before taxes (24) (27) (28) (16) (12) (4)
Tax expense (benefit) of investment income8 5  6  6  5  4  1 
Investment income, after taxes9 (19) (21) (22) (11) (8) (3)
Net operating profit after taxes (NOPAT) 7,037  4,824  3,118  4,276  3,915  3,139 

Based on: 10-K (filing date: 2021-03-22), 10-K (filing date: 2020-03-23), 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in deferred revenue.

3 Addition of increase (decrease) in accrual for exit activities.

4 Addition of increase (decrease) in equity equivalents to net earnings.

5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 4,431 × 3.88% = 172

6 2021 Calculation
Tax benefit of interest expense, net of amount capitalized = Adjusted interest expense, net of amount capitalized × Statutory income tax rate
= 1,044 × 21.00% = 219

7 Addition of after taxes interest expense to net earnings.

8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 24 × 21.00% = 5

9 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Lowe’s Cos. Inc.’s NOPAT increased from 2019 to 2020 and from 2020 to 2021.

Cash Operating Taxes

Lowe’s Cos. Inc., cash operating taxes calculation

US$ in millions

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12 months ended: Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016
Income tax provision 1,904  1,342  1,080  2,042  2,108  1,873 
Less: Deferred income tax expense (benefit) (99) 139  (157) 56  9  (63)
Add: Tax savings from interest expense, net of amount capitalized 219  189  196  318  330  294 
Less: Tax imposed on investment income 5  6  6  5  4  1 
Cash operating taxes 2,217  1,386  1,427  2,298  2,425  2,229 

Based on: 10-K (filing date: 2021-03-22), 10-K (filing date: 2020-03-23), 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Lowe’s Cos. Inc.’s cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Invested Capital

Lowe’s Cos. Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016
Short-term borrowings —  1,941  722  1,137  510  43 
Current maturities of long-term debt 1,112  597  1,110  294  795  1,061 
Long-term debt, excluding current maturities 20,668  16,768  14,391  15,564  14,394  11,545 
Operating lease liability1 4,431  4,444  3,663  3,972  3,937  3,274 
Total reported debt & leases 26,211  23,750  19,886  20,967  19,636  15,923 
Shareholders’ equity 1,437  1,972  3,644  5,873  6,434  7,654 
Net deferred tax (assets) liabilities2 (340) (216) (294) (140) (200) (241)
Deferred revenue3 2,627  2,113  2,126  2,181  2,016  1,807 
Accrual for exit activities4 69  88  361  60  66  67 
Equity equivalents5 2,356  1,985  2,193  2,101  1,882  1,633 
Accumulated other comprehensive (income) loss, net of tax6 136  136  209  (11) 240  394 
Adjusted shareholders’ equity 3,929  4,093  6,046  7,963  8,556  9,681 
Construction in progress7 (831) (506) (525) (530) (464) (513)
Investments8 (706) (532) (474) (510) (466) (529)
Invested capital 28,603  26,805  24,933  27,890  27,262  24,562 

Based on: 10-K (filing date: 2021-03-22), 10-K (filing date: 2020-03-23), 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of deferred revenue.

4 Addition of accrual for exit activities.

5 Addition of equity equivalents to shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

8 Subtraction of investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Lowe’s Cos. Inc.’s invested capital increased from 2019 to 2020 and from 2020 to 2021.

Cost of Capital

Lowe’s Cos. Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 130,462  130,462  ÷ 159,901  = 0.82 0.82 × 14.64% = 11.94%
Debt, including finance or capitalized lease obligations3 25,008  25,008  ÷ 159,901  = 0.16 0.16 × 3.74% × (1 – 21.00%) = 0.46%
Operating lease liability4 4,431  4,431  ÷ 159,901  = 0.03 0.03 × 3.88% × (1 – 21.00%) = 0.08%
Total: 159,901  1.00 12.49%

Based on: 10-K (filing date: 2021-03-22).

1 US$ in millions

2 Equity. See details »

3 Debt, including finance or capitalized lease obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 51,186  51,186  ÷ 77,097  = 0.66 0.66 × 14.64% = 9.72%
Debt, including finance or capitalized lease obligations3 21,467  21,467  ÷ 77,097  = 0.28 0.28 × 3.83% × (1 – 21.00%) = 0.84%
Operating lease liability4 4,444  4,444  ÷ 77,097  = 0.06 0.06 × 4.10% × (1 – 21.00%) = 0.19%
Total: 77,097  1.00 10.75%

Based on: 10-K (filing date: 2020-03-23).

1 US$ in millions

2 Equity. See details »

3 Debt, including finance or capitalized lease obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 87,480  87,480  ÷ 107,117  = 0.82 0.82 × 14.64% = 11.96%
Debt, including finance or capitalized lease obligations3 15,975  15,975  ÷ 107,117  = 0.15 0.15 × 4.04% × (1 – 21.00%) = 0.48%
Operating lease liability4 3,663  3,663  ÷ 107,117  = 0.03 0.03 × 7.68% × (1 – 21.00%) = 0.21%
Total: 107,117  1.00 12.64%

Based on: 10-K (filing date: 2019-04-02).

1 US$ in millions

2 Equity. See details »

3 Debt, including finance or capitalized lease obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 69,852  69,852  ÷ 91,467  = 0.76 0.76 × 14.64% = 11.18%
Debt, including finance or capitalized lease obligations3 17,643  17,643  ÷ 91,467  = 0.19 0.19 × 3.88% × (1 – 33.70%) = 0.50%
Operating lease liability4 3,972  3,972  ÷ 91,467  = 0.04 0.04 × 7.39% × (1 – 33.70%) = 0.21%
Total: 91,467  1.00 11.89%

Based on: 10-K (filing date: 2018-04-02).

1 US$ in millions

2 Equity. See details »

3 Debt, including finance or capitalized lease obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 69,950  69,950  ÷ 90,569  = 0.77 0.77 × 14.64% = 11.31%
Debt, including finance or capitalized lease obligations3 16,683  16,683  ÷ 90,569  = 0.18 0.18 × 4.10% × (1 – 35.00%) = 0.49%
Operating lease liability4 3,937  3,937  ÷ 90,569  = 0.04 0.04 × 7.27% × (1 – 35.00%) = 0.21%
Total: 90,569  1.00 12.00%

Based on: 10-K (filing date: 2017-04-04).

1 US$ in millions

2 Equity. See details »

3 Debt, including finance or capitalized lease obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 67,909  67,909  ÷ 85,053  = 0.80 0.80 × 14.64% = 11.69%
Debt, including finance or capitalized lease obligations3 13,869  13,869  ÷ 85,053  = 0.16 0.16 × 4.48% × (1 – 35.00%) = 0.47%
Operating lease liability4 3,274  3,274  ÷ 85,053  = 0.04 0.04 × 8.70% × (1 – 35.00%) = 0.22%
Total: 85,053  1.00 12.38%

Based on: 10-K (filing date: 2016-03-29).

1 US$ in millions

2 Equity. See details »

3 Debt, including finance or capitalized lease obligations. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Lowe’s Cos. Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016
Selected Financial Data (US$ in millions)
Economic profit1 3,464  1,943  (33) 960  643  98 
Invested capital2 28,603  26,805  24,933  27,890  27,262  24,562 
Performance Ratio
Economic spread ratio3 12.11% 7.25% -0.13% 3.44% 2.36% 0.40%
Benchmarks
Economic Spread Ratio, Competitors4
Amazon.com Inc. — 3.43% 0.06% 0.80% -6.48% -2.21%
Booking Holdings Inc. — -18.79% 28.48% 44.67% 25.06% 19.48%
Home Depot Inc. 17.98% 24.91% 25.35% 17.63% 15.42% 13.08%
Target Corp. 7.20% 5.47% 5.53% 3.75% 4.76% 3.37%
TJX Cos. Inc. -8.05% 10.20% 9.52% 7.47% 7.49% 9.41%

Based on: 10-K (filing date: 2021-03-22), 10-K (filing date: 2020-03-23), 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29).

1 Economic profit. See details »

2 Invested capital. See details »

3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,464 ÷ 28,603 = 12.11%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Lowe’s Cos. Inc.’s economic spread ratio improved from 2019 to 2020 and from 2020 to 2021.

Economic Profit Margin

Lowe’s Cos. Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016
Selected Financial Data (US$ in millions)
Economic profit1 3,464  1,943  (33) 960  643  98 
 
Net sales 89,597  72,148  71,309  68,619  65,017  59,074 
Add: Increase (decrease) in deferred revenue 514  (13) (55) 165  209  98 
Adjusted net sales 90,111  72,135  71,254  68,784  65,226  59,172 
Performance Ratio
Economic profit margin2 3.84% 2.69% -0.05% 1.40% 0.99% 0.17%
Benchmarks
Economic Profit Margin, Competitors3
Amazon.com Inc. — 1.33% 0.03% 0.35% -2.87% -0.69%
Booking Holdings Inc. — -41.33% 21.14% 22.81% 12.69% 12.02%
Home Depot Inc. 6.77% 8.26% 8.01% 6.14% 5.60% 4.99%
Target Corp. 2.37% 1.93% 1.93% 1.41% 1.85% 1.31%
TJX Cos. Inc. -5.47% 4.46% 4.14% 3.36% 3.37% 4.10%

Based on: 10-K (filing date: 2021-03-22), 10-K (filing date: 2020-03-23), 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29).

1 Economic profit. See details »

2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 3,464 ÷ 90,111 = 3.84%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Lowe’s Cos. Inc.’s economic profit margin improved from 2019 to 2020 and from 2020 to 2021.