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Lowe’s Cos. Inc. (NYSE:LOW)

Enterprise Value to FCFF (EV/FCFF)

Intermediate level

Free Cash Flow to The Firm (FCFF)

Lowe’s Cos. Inc., FCFF calculation

US$ in millions

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12 months ended Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015
Net earnings 4,281  2,314  3,447  3,093  2,546  2,698 
Net noncash charges 2,282  3,121  2,114  2,153  2,260  1,663 
Changes in operating assets and liabilities (2,267) 758  (496) 371  (22) 568 
Net cash provided by operating activities 4,296  6,193  5,065  5,617  4,784  4,929 
Cash paid for interest, net of amount capitalized, net of tax1 511  433  411  368  308  318 
Interest capitalized, net of tax2 1  2  3  2  2  1 
Capital expenditures (1,484) (1,174) (1,123) (1,167) (1,197) (880)
Non-cash property acquisitions (441) (44) (97) (86) (102) (44)
Free cash flow to the firm (FCFF) 2,882  5,410  4,259  4,735  3,795  4,324 

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

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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 increased from 2018 to 2019 but then decreased significantly from 2019 to 2020.

Interest Paid, Net of Tax

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

US$ in millions

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12 months ended Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015
Effective Income Tax Rate (EITR)
EITR1 23.90% 31.80% 37.20% 40.50% 42.40% 36.90%
Interest Paid, Net of Tax
Cash paid for interest, net of amount capitalized, before tax 671  635  654  619  535  504 
Less: Cash paid for interest, net of amount capitalized, tax2 160  202  243  251  227  186 
Cash paid for interest, net of amount capitalized, net of tax 511  433  411  368  308  318 
Interest Costs Capitalized, Net of Tax
Interest capitalized, before tax 1  3  5  4  3  2 
Less: Interest capitalized, tax3 —  1  2  2  1  1 
Interest capitalized, net of tax 1  2  3  2  2  1 

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

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2 2020 Calculation
Cash paid for interest, net of amount capitalized, tax = Cash paid for interest, net of amount capitalized × EITR
= 671 × 23.90% = 160

3 2020 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= 1 × 23.90% = 0

Enterprise Value to FCFF Ratio, Current

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

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Selected Financial Data (US$ in millions)
Enterprise value (EV) 118,075 
Free cash flow to the firm (FCFF) 2,882 
Valuation Ratio
EV/FCFF 40.96
Benchmarks
EV/FCFF, Competitors1
Amazon.com Inc. 92.02
Costco Wholesale Corp. 38.49
Dollar General Corp. 33.18
Home Depot Inc. 25.53
Target Corp. 16.51
TJX Cos. Inc. 22.21
Walmart Inc. 24.08
EV/FCFF, Sector
General Retailers 39.33
EV/FCFF, Industry
Consumer Services 33.26

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

1 Click competitor name to see calculations.

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

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Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015
Selected Financial Data (US$ in millions)
Enterprise value (EV)1 69,616  102,974  86,157  84,991  79,846  81,573 
Free cash flow to the firm (FCFF)2 2,882  5,410  4,259  4,735  3,795  4,324 
Valuation Ratio
EV/FCFF3 24.15 19.03 20.23 17.95 21.04 18.86
Benchmarks
EV/FCFF, Competitors4
Amazon.com Inc. — 74.57 80.88 — 89.58 97.16
Costco Wholesale Corp. — 37.11 32.75 16.24 91.81 33.24
Dollar General Corp. 25.20 22.20 22.16 19.87 29.07 25.27
Home Depot Inc. 19.05 21.24 21.24 23.12 21.98 22.78
Target Corp. 14.93 17.80 10.10 9.54 14.42 15.60
TJX Cos. Inc. 19.08 21.16 25.64 18.87 24.50 21.80
Walmart Inc. 22.39 17.27 15.02 11.32 14.23 16.45
EV/FCFF, Sector
General Retailers — 32.32 29.26 29.87 26.20 24.33
EV/FCFF, Industry
Consumer Services — 30.21 24.63 26.65 24.38 24.90

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

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3 2020 Calculation
EV/FCFF = EV ÷ FCFF
= 69,616 ÷ 2,882 = 24.15

4 Click competitor name to see calculations.

Valuation 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 decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.