The stock currently trades at a price-to-earnings ratio of 19x and has a beta of 0.83, and a PEG ratio of 1.17, all of which are positives for the stock.
But, the stock is down over 32% over the last one year. Some of this can be attributed to the lockdown economy, where consumers preferred clothing items that were more ‘premium’. Consumers also pulled back on spending on discretionary items, as lockdowns increased savings. But with the economy slowing down once again, Ross Stores should see volumes pick up. Furthermore, consumer spending is increasingly slowing down as excess savings from the previous years start to deplete, and consumers may look to more reasonably priced alternatives.
The home improvement industry continues to hold up despite consumers pulling back on spending. On average, the industry tends to hold up well during times of recession, despite a fall in discretionary spending on projects such as remodeling. On the other hand, spending on repairs, etc. tends to fare far better. Lowe's revenue should continue to grow at an acceptable pace with the home improvement industry expected to grow anywhere from 3.5-4.5% over the next 5 years, as more and more people look to remodel and spend on their homes. This is largely due to the fact that homes on average are older than ever and will require maintenance and refurbishment.
Lowe’s stock is currently down over 25% from its 52-week high, which has brought valuations down to a level that is more in line with its intrinsic value. The stock currently trades at a 15x price-to-earnings and is expected to bring in $98 billion in revenue in 2022, up 2% y-o-y. It also has a dividend yield of 2%, which might increase, as cash flow improves during the next couple of quarters.