Last Updated: 15 Sep 2024
Executive Summary
Ross Stores Inc. (ROST) is a leading off-price retailer in the United States, offering a wide range of apparel, home goods, and accessories at discounted prices. The company has a strong track record of financial performance, with consistent revenue and earnings growth. ROST currently trades at a premium valuation, but its strong fundamentals and growth prospects support its premium multiple.
Company Overview
Ross Stores was founded in 1982 and operates over 1,500 stores in 40 states. The company's target customer is the value-conscious shopper who seeks quality merchandise at affordable prices. Ross Stores sources its products from a diverse network of suppliers, including manufacturers, wholesalers, and closeouts.
Fundamental Analysis
Revenue: ROST's revenue has grown steadily over the past decade, reaching $21.1 billion in the fiscal year ended January 2024. The company's revenue growth is driven by both store expansion and comparable store sales growth.
Earnings: ROST's earnings per share (EPS) have also grown consistently, reaching $6.19 in fiscal 2024. The company's profit margin has been relatively stable, averaging around 10% over the past five years.
Profitability: ROST's return on assets (ROA) and return on equity (ROE) are both above industry averages, indicating that the company is effectively utilizing its assets and generating strong returns for shareholders.
Valuation: ROST currently trades at a trailing price-to-earnings (P/E) ratio of 25.08, which is above the industry average. However, the company's strong growth prospects and consistent financial performance justify its premium valuation.
Technical Analysis
Trend: ROST's stock price has been trending higher over the past year, breaking above its 200-day moving average in early 2023.
Support and Resistance: The stock has found support at the $145 level and resistance at the $160 level.
Momentum: ROST's relative strength index (RSI) is currently in the overbought zone, indicating that the stock may be due for a pullback.
Short Term Outlook
In the short term, ROST's stock price is likely to consolidate within the $145-$160 range. The company's upcoming earnings report and any macroeconomic developments could impact the stock's direction.
Long Term Outlook
The long-term outlook for ROST is positive. The company's strong fundamentals, growth prospects, and experienced management team position it well to continue delivering shareholder value.
Analyst Recommendations
The majority of analysts covering ROST have a "Buy" or "Strong Buy" rating on the stock. The average analyst target price is $174.81, implying a potential upside of over 12% from the current price.
