Lowe's Companies Inc. Stock Buy Recommendation Reiterated (LOW)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Lowe's Companies (NYSE: LOW) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, solid stock price performance, notable return on equity and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • LOWE'S COMPANIES INC has improved earnings per share by 13.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LOWE'S COMPANIES INC increased its bottom line by earning $1.68 versus $1.42 in the prior year. This year, the market expects an improvement in earnings ($2.08 versus $1.68).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, LOWE'S COMPANIES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 53.19% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • LOW, with its decline in revenue, underperformed when compared the industry average of 17.9%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Specialty Retail industry average, but is greater than that of the S&P 500. The net income increased by 2.5% when compared to the same quarter one year prior, going from $527.00 million to $540.00 million.

Lowe's Companies, Inc. operates as a home improvement retailer. It offers products for maintenance, repair, remodeling, and home decorating. Lowe's Companies has a market cap of $44.5 billion and is part of the services sector and retail industry. The company has a P/E ratio of 24.00, above the S&P 500 P/E ratio of 18.00. Shares are up 15.5% year to date as of the close of trading on Wednesday.

You can view the full Lowe's Companies Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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