Is LOW Stock A Buy As EPS Grows While Sales Shrink?

Lowe’s Companies (LOW) trades at $198, down about 26% over the past year while the S&P 500 (SPY) returned about 19%. The tape reads like a retailer stuck with a cautious DIY customer and a housing market management expects to recover only gradually. Its own numbers say something stranger: per-share earnings compounded higher over the past three years while revenue shrank.

How Did Lowe’s Earn More Per Share Over Three Years While Selling Less?

Revenue shrank at about 1.0% a year over the past three years—with recent top-line gains driven by acquired wholesale businesses rather than core stores—while per-share earnings compounded at about 5.2%. The work happened below the sales line, in expense discipline and a substantially reduced share count over the period. While adjusted operating margin contracted 62 basis points in fiscal Q2 2026 under gross margin and integration pressure, Lowe’s maintained SG&A discipline at 17.2% of sales (14 basis points of adjusted leverage), reflecting the tight overhead control that protected multi-year per-share earnings.

Part of that work shows up on the floor. The rollout of self-watering plant tables into more than 700 stores pulled routine watering out of the garden centers, and all store and field associates moved onto one centralized communications portal. Both free up store hours inside a $90.4 billion business.

Free cash flow over the last twelve months ran at about 105% of reported net income, and fiscal Q2 2026 alone produced $3.1 billion in free cash flow after funding $542 million in capital expenditures, alongside $673 million paid in dividends.

Can Lowe’s Keep That Up While The DIY Customer Stays Cautious?

The pressure is real. Comparable transactions fell 2.1% in fiscal Q2 2026, and the fiscal 2026 outlook came down to approximately $92 billion in sales with roughly flat comparable sales. Management noted that while Lowe’s realized an $80 million ($0.11 per share) gross margin benefit from its own IEEPA tariff refunds, competitors used their proceeds to fund aggressive price cuts in July that Lowe’s chose not to match.

Growth came from what management has been funding. Online sales grew 15.7% in fiscal Q2 2026, helped by Mylow, the online AI agent whose users convert at triple the rate of other shoppers. In appliances Lowe’s delivered a seventh consecutive quarter of positive comparable sales, and Pro and Home Services grew again.

Against that, Foundation Building Materials and Artisan Design Group, its residential construction acquisitions, are a real drag, and management expects that pressure to persist across the second half of fiscal 2026. Fiscal Q3 2026 adjusted diluted earnings per share is guided to roughly 7% below the prior year.

What Do You Get If You Buy Lowe’s At Today’s Price?

You get a trailing price-to-earnings multiple of 16.7, inside a ten-year range of 13.2 to 36.8. Three years of per-share compounding through a shrinking top line says the engine works. The fiscal Q3 2026 guide says it does not outrun the cycle. Today’s multiple appears to give little credit for that record.

The case does not need housing to turn. It needs the cost work to hold while comparable sales stay flat. The number to watch is comparable transactions, which have to stop falling before the DIY side of this business is genuinely back. To judge whether a fall of this size has left a better entry somewhere else, compare it against other beaten-down names.

So Do You Buy Lowe’s For The Compounding?

Perhaps, and only if you can sit through flat comparable sales without needing the housing cycle to turn on a schedule. That is an honest position, and Lowe’s is still one retailer inside one cyclical end market. Before you size it, put it beside the other home improvement names. The Trefis High Quality Portfolio spreads the question across a group of quality businesses instead of resting it on one. That portfolio has a track record of outpacing the three major indices.