Lowe’s Cos. Inc. (NYSE:LOW)

The period demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) initially increased significantly, followed by a decline and subsequent recovery. The cost of capital exhibited an upward trend before stabilizing, while invested capital showed a more moderate pattern of change.

NOPAT Trend

NOPAT increased from US$5,097 million in 2020 to US$7,056 million in 2021, representing a substantial gain. This was followed by a further increase to US$9,827 million in 2022, the highest value observed. A decrease to US$7,020 million occurred in 2023, before a partial recovery to US$8,789 million in 2024. The most recent value for 2025 is US$8,137 million, indicating a slight decline from the 2024 figure.

Cost of Capital Trend

The cost of capital rose from 12.00% in 2020 to 14.03% in 2021 and peaked at 14.20% in 2022. It then decreased to 13.33% in 2023 and 13.79% in 2024, before settling at 13.62% in 2025. This suggests increasing financing costs initially, followed by a period of stabilization.

Invested Capital Trend

Invested capital increased from US$26,717 million in 2020 to US$28,534 million in 2021. A decrease to US$26,296 million was observed in 2022, followed by a further decline to US$24,710 million in 2023. The figure then rose to US$25,913 million in 2024 and US$26,276 million in 2025, indicating a relatively stable level in recent periods.

Economic Profit Trend

Economic profit mirrored the NOPAT trend, increasing from US$1,890 million in 2020 to US$3,051 million in 2021 and reaching a peak of US$6,093 million in 2022. It then decreased to US$3,725 million in 2023, before recovering to US$5,217 million in 2024. The latest value for 2025 is US$4,557 million, representing a decrease from the 2024 level. The fluctuations in economic profit are influenced by both NOPAT and the cost of capital.

Overall, the period shows a pattern of growth followed by a correction, with recent years demonstrating a stabilization of performance. While NOPAT and economic profit remain positive, the slight decline in both metrics in 2025 warrants further investigation.

Net Earnings

The net earnings of the company demonstrated a significant upward trend from 2020 to 2022, rising from 4,281 million US dollars to 8,442 million US dollars. This almost doubled the net earnings within a two-year period, indicating robust profitability. However, in 2023, there was a noticeable decline to 6,437 million US dollars, followed by a partial recovery in 2024 to 7,726 million US dollars. The most recent data for 2025 shows a decrease again to 6,957 million US dollars, suggesting some volatility or challenges impacting net earnings in the latter period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures align with the general trend observed in net earnings. Starting at 5,097 million US dollars in 2020, NOPAT increased steadily through 2021 and peaked at 9,827 million US dollars in 2022. This indicates improved operational efficiency and profitability. Following the peak, NOPAT decreased to 7,020 million US dollars in 2023, then rose again to 8,789 million US dollars in 2024, before declining to 8,137 million US dollars in 2025. Although the fluctuations in NOPAT mirror those in net earnings, the values still reflect a relatively strong operating performance over the years.

The data reflects the annual figures for income tax provision and cash operating taxes over a six-year period. Both financial items show a general upward trend from 2020 to 2023, followed by a noticeable decline in the later years.

Income Tax Provision

The income tax provision increased significantly from 1,342 million USD in 2020 to a peak of 2,766 million USD in 2022. After 2022, the provision declined steadily to 2,196 million USD by 2025. This pattern suggests a rise in taxable income or tax liabilities initially, followed by effective tax management or reduced taxable income in the later years.

Cash Operating Taxes

Cash operating taxes also exhibit consistent growth, increasing from 1,386 million USD in 2020 to a peak of 3,055 million USD in 2023. Post-2023, these taxes decreased to 2,501 million USD by 2025. This trend aligns closely with the income tax provision pattern, indicating cash tax payments followed similar dynamics, perhaps influenced by timing differences or changes in tax regulations.

Overall, the data shows strong growth in tax-related expenses through early years, peaking around 2022-2023, with subsequent reductions suggesting strategic tax planning, fluctuations in earnings, or changes in tax rules that impacted both provision and cash taxes similarly.

The financial data reveals several notable trends over the periods analyzed. One prominent pattern is the consistent increase in total reported debt and leases from 23,750 million US dollars in early 2020 to a peak of 40,145 million US dollars in early 2024, followed by a slight reduction to 39,678 million US dollars in early 2025. This indicates a significant rise in the company's leverage over the five-year period, particularly between 2021 and 2024.

Shareholders' equity shows a concerning downward trajectory, decreasing from 1,972 million US dollars in early 2020 to a negative value starting in 2022. The deficit deepens sharply from -4,816 million US dollars in early 2022 to a low point around -15,050 million US dollars in early 2024, with a minor improvement to -14,231 million US dollars in early 2025. This negative equity position suggests substantial accumulated losses or other equity-reducing events, which may impact the company’s financial stability and shareholder confidence.

Invested capital fluctuates throughout the period, starting at 26,717 million US dollars in early 2020 and peaking at 28,534 million US dollars in early 2021. Subsequently, it declines to a low of 24,710 million US dollars in early 2023 before gradually increasing again to 26,276 million US dollars by early 2025. These movements reflect variations in the company’s long-term investments and financing structure, possibly influenced by the changes in debt and equity.

Total Reported Debt & Leases

Shows a strong upward trend from 2020 through 2024, increasing by approximately 69%, followed by a slight decrease in 2025.

Shareholders’ Equity (Deficit)

Transitions from positive equity into a growing deficit starting in 2022, with the deficit nearly tripling by 2024 and remaining substantial in 2025.

Invested Capital

Peaks in 2021, declines through 2023, then recovers modestly by 2025, suggesting adjustments in capital investment and financing.

Overall, the company exhibits increasing financial leverage and deteriorating equity over the analyzed period, which may reflect operational challenges, increased borrowing, or sustained losses. The minor recovery in invested capital in the later periods could indicate attempts to stabilize or improve financial structure. Close attention to the relationship between debt levels and equity is warranted to assess ongoing financial health and risk exposure.

The economic spread ratio demonstrates a generally increasing trend over the observed period, albeit with some fluctuation. Initial values indicate a relatively modest spread, which expands significantly before stabilizing at a higher level. Economic profit exhibits considerable variability, while invested capital shows a more subdued pattern.

Economic Spread Ratio

The economic spread ratio increased from 7.07% in January 2020 to a peak of 23.17% in January 2022. This represents a substantial improvement in the company’s ability to generate returns exceeding its cost of capital. Following the peak, the ratio decreased to 15.07% in February 2023, but then recovered to 20.13% in February 2024. The most recent value, 17.34% as of January 2025, suggests a slight moderation from the prior year, but remains significantly above the initial level. This pattern suggests periods of strong performance followed by stabilization or minor correction.

Economic Profit

Economic profit increased substantially from US$1,890 million in January 2020 to US$3,051 million in January 2021, and further to US$6,093 million in January 2022. This growth aligns with the expansion of the economic spread ratio. However, economic profit then decreased to US$3,725 million in February 2023, before rising again to US$5,217 million in February 2024. The latest reported value of US$4,557 million in January 2025 indicates a decrease from the previous year, but remains well above the 2020 level. The fluctuations in economic profit suggest sensitivity to underlying business conditions or strategic initiatives.

Invested Capital

Invested capital initially increased from US$26,717 million in January 2020 to US$28,534 million in January 2021. It then decreased to US$26,296 million in January 2022 and continued to decline to US$24,710 million in February 2023. A subsequent increase to US$25,913 million was observed in February 2024, followed by a further increase to US$26,276 million in January 2025. The changes in invested capital are less dramatic than those observed in economic profit and the economic spread ratio, suggesting a relatively stable capital base despite operational fluctuations.

The observed trends indicate a period of improving profitability and efficiency, followed by a period of stabilization. While economic profit has fluctuated, the economic spread ratio has generally remained at a higher level than initially observed, suggesting sustained value creation. The relatively stable invested capital base provides a foundation for these performance improvements.

The economic profit margin exhibited a generally positive trend over the observed period, though with some fluctuation. Initial values increased significantly before stabilizing and experiencing a slight decline in the most recent year presented.

Economic Profit Margin Trend

The economic profit margin began at 2.62% as of January 31, 2020, and increased to 3.39% by January 29, 2021. A substantial increase was then observed, reaching a peak of 6.30% on January 28, 2022. Following this peak, the margin decreased to 3.85% as of February 3, 2023, before recovering to 6.05% on February 2, 2024. The latest reported value, as of January 31, 2025, indicates a slight decrease to 5.45%.

Economic profit itself demonstrated a similar pattern of growth followed by some volatility. The largest absolute increase in economic profit occurred between 2020 and 2022. While economic profit decreased from 2022 to 2023, it increased again in 2024, before decreasing slightly in 2025.

Relationship between Economic Profit and Adjusted Net Sales

Adjusted net sales increased from US$72,135 million in 2020 to US$96,664 million in 2022, contributing to the rise in economic profit during that period. Although adjusted net sales remained relatively stable between 2022 and 2023, a decrease was observed in both 2024 (US$86,206 million) and 2025 (US$83,667 million). The economic profit margin’s performance suggests that profitability improvements, beyond sales volume, were a key driver of the initial gains, but the recent decline in sales appears to be impacting overall economic profit.

The economic profit margin’s recent stabilization at a level above the initial 2020 value suggests a sustained improvement in the company’s ability to generate profit relative to its capital costs, despite the recent decrease in adjusted net sales. However, the slight decline in the margin in the most recent year warrants further investigation.