Lowe’s Companies, Inc. (NYSE:LOW) had been under pressure from activist investors D. E. Shaw Group to make some operational changes.

Instead of getting into a public fight with Shaw, and perhaps because Shaw’s people had some good ideas, LOW management decided to add two independent members to the Board of Directors and will add a third. Considering Shaw owns barely more than 1% of the company, that seems like a reasonable give.

This came following “constructive” talks with Shaw.

One addition to the LOW board is Lisa Wardell, the CEO of Adtalem Global Eduction Inc (NYSE:ATGE), formerly known as DeVry University. Wardell has extensive experience in business. She was the COO of The RLJ Companies, a holding company with assets in numerous industries, and with that job came experience in private equity and M&A.

Shaw pushed for David Batchelder to be added to Lowe’s board. He is best known for serving on the board of Home Depot Inc (NYSE:HD) during its proxy fight 10 years ago, and he pushed for a company turnaround at the time.

Apparently the third addition to the LOW board will be Brian Rogers, who is chairman of the terrific T. Rowe Price Group Inc (NASDAQ:TROW) and was its chief investment officer at one point.

All in all, this seems like a win for LOW stockholders, as far as personnel. The first move announced by Lowe’s was to increase its share repurchase authorization by $5 billion, on top of the $2.1 billion remaining.

I’m normally unhappy with buybacks, because most companies are vastly overpaying for their own stock. However, at current levels, Lowe’s stock is not unreasonably priced. Backing out the effects from stock repurchases, organic net income looks to increase by 17% over the next year.

I add a 10% premium for its world-class brand name and its ability to generate consistently high free cash flow (about $4 billion annually) to that number to arrive at 20.4x being a reasonable price. However, since LOW is a true growth stock because it increases organic net income by more than 15%, I allow a PEG ratio of up to 2.0.

However, Lowe’s is not an attractive play to dividend investors, with a yield presently at 1.5%. I personally would like to see some of that buyback capital to be deployed into the dividend.

The 3% level would lift LOW stock into an air that would be more interesting to income investors. If management is willing to invest another $7.1 billion into buybacks, diverting $1.1 billion of that into the dividend gets LOW stock into the 3% range.

Adding Batchelder obviously suggests LOW may be gearing up for some major operational changes that will help Lowe’s become more efficient and possibly compete with Home Depot more effectively. The additions of Wardell and Rogers suggest something in the area of private equity may be afoot — maybe strategic investments of some kind or attracting private equity capital to take a position.

Bottom Line on LOW Stock

Regardless, this seems like a good move for LOW stock. Lowe’s has pretty much kept pace with Home Depot over the past five years. A disconnect occurred about a year ago, with HD performing slightly better, but LOW has been closing the gap.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance, and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.