Ross Stores Inc (ROST, Financial) recently showcased a daily gain of 7.79%, despite a 3-month downturn of -3.75%. With an Earnings Per Share (EPS) of 5.93, investors are keenly observing whether the stock reflects its true market value. This analysis delves into whether Ross Stores (ROST) is fairly valued, providing a comprehensive look at its financial health and market positioning.
Company Overview
Ross Stores operates as a leading off-price apparel and accessories retailer under its Ross Dress for Less banner. The company benefits from a unique business model, where it purchases excess brand-name merchandise from manufacturing overruns and retail liquidations, offering them at a 20%-60% discount. With over 1,750 Ross Dress for Less stores and nearly 350 DD's Discounts stores, Ross caters primarily to middle-income consumers in densely populated suburban areas. This strategic positioning allows Ross to maintain a strong presence in the retail sector.
Understanding the GF Value
The GF Value is a proprietary measure calculated to determine the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projected future business performance. This valuation suggests that the fair trading value for Ross Stores is ideally set at $131.35 per share. With the current stock price at $142.13, the market cap stands at $47.70 billion, indicating that Ross Stores is fairly valued, aligning closely with our GF Value estimate.
Financial Strength and Stability
Assessing the financial strength of a company is crucial in mitigating the risk of capital loss. Ross Stores boasts a cash-to-debt ratio of 0.8, ranking it higher than 61.13% of its peers in the Retail - Cyclical industry. This indicates a fair level of financial health, supported by a financial strength rating of 7 out of 10.
Profitability and Growth Prospects
Ross Stores has demonstrated strong profitability, maintaining a positive earnings record over the past decade. With a revenue of $20.70 billion and an operating margin of 11.78%, the company's profitability ranks better than 82.91% of its competitors. Additionally, Ross Stores has shown impressive growth, with an average annual revenue increase of 19.6%, significantly outpacing industry averages.
Investment Return Analysis
Comparing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides insight into value creation. Ross Stores' ROIC stands at 23.93, substantially higher than its WACC of 9.31, suggesting effective capital management and value generation for shareholders.
Conclusion
Ross Stores (ROST, Financial) appears to be fairly valued, with strong financial health, robust profitability, and promising growth prospects. For a deeper dive into Ross Stores' financials and to explore potential investment opportunities, visit the Ross Stores 30-Year Financials.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
