1 Number That Makes Lowe's Stock an Obvious Buy Before Aug. 19
Key Points
Lowe's stock is trading at its lowest forward P/E in more than two years.
The Dividend King just boosted its payout.
- 10 stocks we like better than Lowe's Companies ›
Heading into its second-quarter earnings release on Aug. 19, Lowe's (NYSE: LOW) is trading at a discount.
Its current P/E ratio of 18.5 is below its historical average of 20.5, and its forward P/E of 17.4 is the lowest it's been since the end of 2023, when it was 15.7.
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This relatively low valuation alone makes the home improvement retail store stock worth considering heading into its earnings release.
Image source: Getty Images.
Another reason to buy is its ridiculously good dividend. Lowe's increased its dividend in July to $1.25 per share at a solid yield of 2.28%. This marks 55 straight years of dividend increases for the Dividend King.
What to watch in Q2 earnings
The low valuation for Lowe's could spark a surge in the share price if Lowe's reports good second-quarter earnings.
It has some solid momentum with five straight earnings beats. In Q2, analysts anticipate revenue of $26.2 billion, which would be up 13% billion from Q1. Adjusted earnings are estimated to be $4.24 per share in Q2, which would be down from $4.33 per share in Q2 2025, mainly due to costs associated with recent acquisitions.
Also, comparable-store sales are targeted to be between flat and a 2% increase. That is a key metric investors should watch. If the number is at the high end of that range or exceeds it, the stock price could jump. In addition, Lowe's has been steadily increasing its online sales. Last quarter, that segment saw a 15% gain. Investors will want to see if that continues trending higher.
Further, while Lowe's doesn't post its growth rates for its Pro business, which caters to contractors, there is typically commentary around it. Listen to what management says about Pro growth, as it's a higher-margin business than the DIY retail business. Pro growth may also signal that it is eating into the market share of rival Home Depot.
Should you buy stock in Lowe's Companies right now?
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.
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