Should You Buy Lowe’s Stock For Its Cash?

For questions about this article or underlying research, email help@trefis.com.

Lowe’s Companies (LOW) produced free cash flow equal to 6.3% of its market value over the last twelve months, compared with 4.3% for the median S&P 500 company. A cash yield that high, after a year in which the stock lost 16.6%, usually means one of two things: the shares are cheap, or investors expect the business to shrink. Which one is Lowe’s?

Lowe’s Looks Cheap Rather Than Shrinking

Total sales at Lowe’s are still rising, helped by the FBM business it bought last year, even though comparable sales were nearly flat in the latest quarter. While free cash flow sits below last year’s level, it remains above the mark from three years ago. Based on its results so far, the company looks more like a cheap stock than a shrinking business.

That cash matters to an owner. Shareholders own a slice of the free cash flow a company produces, whether it pays that money out or not, just as they own a slice of its profit. When the market gives that cash its due, the share price tends to follow, particularly when the cash is growing.

Nearly all of Lowe’s sales come from its Retail Home Improvement business. Sales over the twelve months to July 31, 2026, reached $90.4 billion, up 8.2% from a year earlier. In the latest quarter, however, comparable sales rose just 0.2%.

Capital spending consumed 24.4% of the cash brought in by operations over those twelve months, leaving free cash flow of $7.0 billion. That tops the $6.64 billion reported three years earlier, but falls short of the $7.69 billion generated a year ago. In every twelve-month stretch in between, free cash flow exceeded $5 billion.

Lowe’s also carries debt, and lenders rank ahead of owners. Net debt equals 35.1% of market value. When counting that debt, free cash flow represents 4.7% of the company’s enterprise value. Over the last twelve months, operating income covered interest expense 6.4 times.

Shoppers Are Holding Back On Big Home Projects

Do-it-yourself demand remains under pressure, management said on its August 19, 2026, call. At the same time, core Pro customers report that homeowners are choosing smaller repair jobs over larger remodeling projects. In the quarter ended July 31, 2026, comparable transactions fell 2.1%, while the average ticket rose 2.3%.

Lowe’s is also keeping less of each sale as profit. The operating margin was 11.4% over the last twelve months, down from 12.5% two years earlier. Management said gross margin in the latest quarter was held down in part by the FBM and ADG acquisitions, businesses that sell into new home construction, where demand is weak. Management also said competitors used tariff refunds to cut prices on grills, patio and live goods, that Lowe’s chose not to match some of them, and that it sees the price pressure as transitory.

Some of this is already in the forecast. On August 19, management cut its fiscal 2026 sales forecast to about $92 billion, from $93 billion in May, and it now expects comparable sales to be roughly flat. With the stock down 16.6% over the past year, the price appears to assume that weak demand for home projects lasts.

What You Should Watch At Lowe’s Next Report

Lowe’s free cash flow sits above its level of three years ago but below last year’s, leaving it open whether the figure is steady or growing. The pace of debt reduction is also an open question. On the August call, management put its adjusted debt-to-EBITDA, which measures debt against earnings, at 3.0 times. The company expects to reach its 2.75 times target in mid-2027.

Lowe’s is expected to report its next results in November 2026, and its free cash flow over twelve months is the figure to watch.

Does This Mean You Should Act On LOW?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.

Spot an error or want more like this? Tell us in 10 seconds.