LOW 240.45 (+3.57%)
US5486611073Retail - CyclicalHome Improvement Retail

Last update on 2024-06-06

Lowes Companies (LOW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Comprehensive Piotroski F-Score analysis of Lowes Companies (LOW) for 2023, highlighting its financial strengths and weaknesses with a final score of 6/9.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 6

We're running Lowes Companies (LOW) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

Lowe's Companies (LOW) received a Piotroski F-Score of 6 out of 9, indicating a fairly strong financial position. LOW demonstrates solid profitability with a positive net income and strong cash flow from operations, consistently outperforming its net income. However, there are areas of concern, such as the decline in Return on Assets and the rising leverage, suggesting potential risks. The company has shown improvements in liquidity and continues to effectively utilize assets, as reflected by a rising asset turnover ratio. Nonetheless, the gross margin is slightly decreasing, indicating competitive or cost pressures.

Insights for Value Investors Seeking Stable Income

Given Lowe's moderately high Piotroski F-Score of 6, it shows a number of positive characteristics like strong profitability and improving asset efficiency. However, the increased leverage and decreasing Return on Assets are areas to be cautious about. As an investor, it is worth considering Lowe's for its operational strengths and history of share buybacks, but you should also monitor the potential risks associated with increasing debt and competitive pressures affecting gross margin.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Lowes Companies (LOW)

Company has a positive net income?

Netincome indicates the profitability of a company after taxes and all expenses. A positive value signifies that the company is generating more revenue than its costs.

Historical Net Income of Lowes Companies (LOW)

The net income for Lowe's Companies (LOW) in 2023 is $6,437,000,000, which is significantly positive. Evaluating the historical data over the last 20 years, we see that Lowe's has consistently maintained positive net income figures. Starting from $1,471,000,000 in 2003, the company has shown an upward trend with some fluctuations, peaking at $8,442,000,000 in 2022 before slightly decreasing in 2023. This positive net income trend reflects strong financial health and effective management, contributing to the overall stability and growth potential of the company. Therefore, Lowe's earns 1 point for this criterion.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion measures whether the company is generating positive cash flow from its core business activities. A positive CFO is crucial for the financial health of a company as it indicates reliable income.

Historical Operating Cash Flow of Lowes Companies (LOW)

For the fiscal year 2023, Lowe's Companies (LOW) reported a Cash Flow from Operations (CFO) of $8,589,000,000. This CFO is indeed positive, earning the company 1 point according to the Piotroski Analysis criteria. This is beneficial as it indicates that Lowe's core business operations are generating sufficient cash flow, enhancing its operational stability. When looking at the historical data over the past 20 years, the CFO has been consistently positive, with substantial figures reaching their peak in 2021 at $11,049,000,000. This consistent trend showcases Lowe's robust operational cash generation capability, reinforcing the company's strong financial position.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. It is an important metric to assess how efficiently a company utilizes its assets to generate earnings.

Historical change in Return on Assets (ROA) of Lowes Companies (LOW)

Lowe's Companies (LOW) showed a decrease in ROA from 0.1848 in 2022 to 0.1457 in 2023. This is a negative trend as a higher ROA indicates better efficiency in utilizing assets. Comparing against the industry median, Lowe's consistently lags behind in ROA, suggesting potential issues in operational efficiency or asset utilization.

Operating Cashflow are higher than Netincome?

The Piotroski F-Score includes a criterion where Operating Cash Flow (OCF) should be greater than Net Income. This ensures the company's profits are not just accounting figures, but are genuinely backed by cash earnings. It's a strong indicator of quality earnings and operational effectiveness.

Historical accruals of Lowes Companies (LOW)

In 2023, Lowe's Companies (LOW) reported an Operating Cash Flow (OCF) of $8,589,000,000 and a Net Income of $6,437,000,000. Clearly, the OCF is higher than the Net Income. This translates into 1 point for this Piotroski criterion. The significance of this can be looked back through the last 20 years of operational data, as LOW has consistently shown an impressive OCF performance. A highlight includes 2021 where the OCF was $11,049,000,000 against a net income of $5,835,000,000 showing robust operational cash capability. LOW maintained a positive accrual perspective, denoting sustained legal earnings over time (0.1674 to 0.1965 over 20 years). These numbers signify that LOW's earnings might be less prone to accounting adjustments and more grounded in real cash transactions—reinforcing confidence in LOW's operational health.

Liquidity of Lowes Companies (LOW)

Leverage is declining?

Change in Leverage assesses if a company has increased its relative level of debt compared to its equity. A decrease in leverage suggests better financial health.

Historical leverage of Lowes Companies (LOW)

The leverage for Lowes Companies (LOW) increased from 0.6246 in 2022 to 0.8325 in 2023. This is a significant rise, indicating the company has taken on more debt relative to its equity. As debt can increase financial risk, particularly in volatile markets or recessionary periods, the increase in leverage is generally viewed as a negative trend. Historically, LOW has shown an upward trend in leverage with slight regressions, suggesting an overall strategy integrating higher levels of debt. Therefore, this results in 0 points for this criterion.

Current Ratio is growing?

The change in the current ratio, a measure of a company's ability to cover its short-term obligations with short-term assets, is critical as it indicates liquidity improvements or deteriorations.

Historical Current Ratio of Lowes Companies (LOW)

For Lowes Companies (LOW), the current ratio increased from 1.0199 in 2022 to 1.099 in 2023, showing a positive trend in liquidity. Despite this increase, it's worth noting that the current ratio is still below the industry median of 1.4899 for 2023. Over the last 20 years, LOW's current ratio has shown fluctuations, reaching a peak of 1.5562 in 2003 and a low of 0.9814 in 2019. While the current ratio's increase in 2023 is a positive sign, the company might still be at a slight liquidity disadvantage compared to the industry. The improvement scores 1 point under Piotroski's criteria.

Number of shares not diluted?

This criterion evaluates whether a company is actively reducing its number of outstanding shares. A decrease is generally seen favorably as it can signal share buybacks, increasing investor ownership efficacy and EPS.

Historical outstanding shares of Lowes Companies (LOW)

In 2023, the Outstanding Shares of Lowe's Companies decreased to 629,000,000 from 696,000,000 in 2022. This decrement is positive and merits 1 point. Historical data shows a consistent reduction in outstanding shares over the past two decades, from 1,590,270,270 shares in 2003 to 629,000,000 shares in 2023, indicating persistent management efforts toward stock buybacks and value creation for shareholders.

Operating of Lowes Companies (LOW)

Cross Margin is growing?

Change in Gross Margin measures the difference in the company's Gross Margin between two periods and indicates how effectively a company is producing its goods and services.

Historical gross margin of Lowes Companies (LOW)

Upon comparing Lowe's Companies' Gross Margin from 2022 (0.333) with that of 2023 (0.3323), it is observed that there has been a slight decrease. The Gross Margin of 0.3323 in 2023 is marginally lower than the Gross Margin of 0.333 in 2022. Therefore, no point is assigned for this criterion. Historically, Lowe's Gross Margin has seen various fluctuations, peaking at 0.3514 in 2011 and reaching a low of 0.318 in 2020. In comparison, the industry median gross margin has continuously been higher, despite a decline from its peak of 0.414 in 2021 to 0.3673 in 2023. This decline may suggest competitive pricing pressures or rising costs within the industry.

Asset Turnover Ratio is growing?

Asset turnover ratio measures how efficiently a company uses its assets to generate sales revenue. An increasing ratio indicates improved efficiency.

Historical asset turnover ratio of Lowes Companies (LOW)

Comparing the asset turnover of 2.1972 in 2023 to 2.1067 in 2022, Lowe's Companies (LOW) has experienced an increase in its asset turnover. This rise, albeit modest, from 2.1067 to 2.1972 implies a more efficient utilization of assets to generate revenue in 2023. This positive trend is noteworthy when placed in the context of LOW's historical performance; the company has progressively improved its asset turnover ratio over the last 20 years. For instance, it rose from 1.7752 in 2003 to over 2.0 in the 2020s, reflecting sustained efficiency gains. Hence, for 2023, LOW earns 1 point in the Piotroski analysis for this criterion.


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