Microsoft Excel LibreOffice Calc

Lowe’s Cos. Inc. (LOW)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Free Cash Flow to The Firm (FCFF)

Lowe’s Cos. Inc., FCFF calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
Net earnings 2,314  3,447  3,093  2,546  2,698  2,286 
Net noncash charges 3,121  2,114  2,153  2,260  1,663  1,616 
Changes in operating assets and liabilities 758  (496) 371  (22) 568  209 
Net cash provided by operating activities 6,193  5,065  5,617  4,784  4,929  4,111 
Cash paid for interest, net of amount capitalized, net of tax1 433  411  368  308  318  282 
Interest capitalized, net of tax2 2  3  2  2  1  2 
Capital expenditures (1,174) (1,123) (1,167) (1,197) (880) (940)
Non-cash property acquisitions, including assets acquired under capital lease (44) (97) (86) (102) (44) (15)
Free cash flow to the firm (FCFF) 5,410  4,259  4,735  3,795  4,324  3,441 

Based on: 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), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

1, 2 See Details »

Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Lowe’s Cos. Inc.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Lowe’s Cos. Inc.’s FCFF declined from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Interest Paid, Net of Tax

Lowe’s Cos. Inc., interest paid, net of tax calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
Effective Income Tax Rate (EITR)
EITR1 31.80% 37.20% 40.50% 42.40% 36.90% 37.80%
Interest Paid, Net of Tax
Cash paid for interest, net of amount capitalized, before tax 635  654  619  535  504  454 
Less: Cash paid for interest, net of amount capitalized, tax2 202  243  251  227  186  172 
Cash paid for interest, net of amount capitalized, net of tax 433  411  368  308  318  282 
Interest Costs Capitalized, Net of Tax
Interest capitalized, before tax 3  5  4  3  2  4 
Less: Interest capitalized, tax3 1  2  2  1  1  2 
Interest capitalized, net of tax 2  3  2  2  1  2 

Based on: 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), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

1 See Details »

2019 Calculations

2 Cash paid for interest, net of amount capitalized, tax = Cash paid for interest, net of amount capitalized × EITR
= 635 × 31.80% = 202

3 Interest capitalized, tax = Interest capitalized × EITR
= 3 × 31.80% = 1

Enterprise Value to FCFF Ratio, Current

Lowe’s Cos. Inc., current EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 92,791 
Free cash flow to the firm (FCFF) 5,410 
Ratio
EV/FCFF 17.15
Benchmarks
EV/FCFF, Competitors
Amazon.com Inc. 147.61
Costco Wholesale Corp. 39.57
eBay Inc. 17.07
Home Depot Inc. 22.93
Netflix Inc. —
Target Corp. 19.35
TJX Cos. Inc. 21.81
Walmart Inc. 19.03
EV/FCFF, Sector
General Retailers 40.96
EV/FCFF, Industry
Consumer Services 28.65

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

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Enterprise Value to FCFF Ratio, Historical

Lowe’s Cos. Inc., historical EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 102,974  86,157  84,991  79,846  81,573  59,763 
Free cash flow to the firm (FCFF)2 5,410  4,259  4,735  3,795  4,324  3,441 
Ratio
EV/FCFF3 19.03 20.23 17.95 21.04 18.86 17.37
Benchmarks
EV/FCFF, Competitors
Amazon.com Inc. — 125.66 — 125.27 121.38 —
Costco Wholesale Corp. — 32.60 16.20 90.26 33.09 25.32
eBay Inc. — 15.42 17.65 15.63 12.28 14.40
Home Depot Inc. 21.24 21.24 23.12 21.98 22.78 18.16
Netflix Inc. — — — — — —
Target Corp. 17.80 10.10 9.54 14.42 15.60 13.87
TJX Cos. Inc. 21.45 26.00 19.58 24.86 22.43 24.87
Walmart Inc. 17.27 15.02 11.32 14.23 16.45 24.10
EV/FCFF, Sector
General Retailers — 35.41 36.28 28.57 25.47 28.12
EV/FCFF, Industry
Consumer Services — 25.20 27.72 23.83 23.67 25.70

Based on: 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), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

1 See Details »

2 See Details »

2019 Calculations

3 EV/FCFF = EV ÷ FCFF
= 102,974 ÷ 5,410 = 19.03

Ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Lowe’s Cos. Inc.’s EV/FCFF ratio increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.