Over the past six months, Ross Stores has been a great trade, beating the S&P 500 by 21.6%. Its stock price has climbed to $255.10, representing a healthy 32.6% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Following the strength, is ROST a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Are We Positive on ROST?
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
1. New Stores Popping Up Gradually, Supporting Growth
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Ross Stores sported 2,282 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 3.8% annual growth. This was faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Ross Stores has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 5.4%.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Ross Stores’s five-year average ROIC was 30.7%, placing it among the best consumer retail companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons Ross Stores is a high-quality business worth owning, and with its shares outperforming the market lately, the stock trades at 32.3× forward P/E (or $255.10 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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