Lowe's (MEX:LOW) ROC % : 25.86% (As of Oct. 2024)

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What is Lowe's ROC %?

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Lowe's's annualized return on capital (ROC %) for the quarter that ended in Oct. 2024 was 25.86%.

As of today (2024-12-14), Lowe's's WACC % is 8.44%. Lowe's's ROC % is 25.47% (calculated using TTM income statement data). Lowe's generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.

Lowe's ROC % Historical Data

The historical data trend for Lowe's's ROC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

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Lowe's ROC % Chart

Lowe's Annual Data

Trend

Jan15

Jan16

Jan17

Jan18

Jan19

Jan20

Jan21

Jan22

Jan23

Jan24

ROC %

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16.98

24.36

29.36

22.67

28.01

Lowe's Quarterly Data
	Jan20	Apr20	Jul20	Oct20	Jan21	Apr21	Jul21	Oct21	Jan22	Apr22	Jul22	Oct22	Jan23	Apr23	Jul23	Oct23	Jan24	Apr24	Jul24	Oct24
ROC %	Get a 7-Day Free Trial															27.28	16.17	26.39	35.95	25.86

Lowe's ROC % Calculation

Lowe's's annualized Return on Capital (ROC %) for the fiscal year that ended in Jan. 2024 is calculated as:

	ROC % (A: Jan. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Jan. 2023 )	+	Invested Capital (A: Jan. 2024 ))	/ count )
=	198505.344 * ( 1 - 24.07% )	/	( (547924.105	+	528236.856)	/ 2 )
=	150725.1076992	/	538080.4805
=	28.01 %

where

	Invested Capital		(A: Jan. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	821622.985	-	248359.176	-	( 25339.704	-	max(0, 366767.778	-	403066.716	+	25339.704	))
=	547924.105

	Invested Capital		(A: Jan. 2024 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	717879.28	-	173823.144	-	( 15819.28	-	max(0, 267399.082	-	327567.31	+	15819.28	))
=	528236.856

Lowe's's annualized Return on Capital (ROC %) for the quarter that ended in Oct. 2024 is calculated as:

	ROC % (Q: Oct. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Jul. 2024 )	+	Invested Capital (Q: Oct. 2024 ))	/ count )
=	203198.52 * ( 1 - 23.61% )	/	( (567353.932	+	633212.584)	/ 2 )
=	155223.349428	/	600283.258
=	25.86 %

where

	Invested Capital		(Q: Jul. 2024 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	835660.065	-	192223.76	-	( 81085.1	-	max(0, 339329.985	-	415412.358	+	81085.1	))
=	567353.932

	Invested Capital		(Q: Oct. 2024 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	896264.929	-	212372.903	-	( 65522.709	-	max(0, 389550.635	-	440230.077	+	65522.709	))
=	633212.584

Note: The Operating Income data used here is four times the quarterly (Oct. 2024) data.

Lowe's (MEX:LOW) ROC % Explanation

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.

There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.

Why is ROC % important?

Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Lowe's's WACC % is 8.44%. Lowe's's ROC % is 25.47% (calculated using TTM income statement data). Lowe's generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.

Be Aware

Like ROE % and ROA %, ROC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

Lowe's ROC % Related Terms

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Lowe's Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Retail - Cyclical » Lowe's Companies Inc (MEX:LOW) » Definitions » ROC %

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Address

1000 Lowes Boulevard, Mooresville, NC, USA, 28117

Website

https://www.lowes.com

Lowe's is the second-largest home improvement retailer in the world, operating more than 1,700 stores in the United States, after the 2023 divestiture of its Canadian locations (RONA, Lowe's Canada, Réno-Dépôt, and Dick's Lumber). The firm's stores offer products and services for home decorating, maintenance, repair, and remodeling, with maintenance and repair accounting for two thirds of products sold. Lowe's primarily targets retail do-it-yourself (around 75% of sales) and do-it-for-me customers, but has expanded its commercial and professional business clients to 25% from less than 20% in the past six years. We estimate Lowe's captures a high-single-digit share of the domestic home improvement market, based on US Census data and management's market size estimates.