Ross Stores Inc (ROST, Financial) recently reported a notable daily gain of 8.75%, yet it faces a 3.26% loss over the last three months. With an Earnings Per Share (EPS) of 5.56, investors might wonder: is the stock fairly valued? This article delves into Ross Stores (ROST)'s valuation, encouraging readers to explore the financial intricacies that determine its market price.
Company Overview
Ross Stores operates as an off-price retailer primarily under the Ross Dress for Less banner, targeting middle-income consumers with a unique treasure hunt shopping experience. The company also runs nearly 350 DD's Discounts stores catering to lower-income shoppers. With over 1,750 stores, Ross Stores strategically sources excess brand-name merchandise to offer significant discounts. As of now, Ross Stores (ROST, Financial) is trading at $143.4 per share with a market cap of $48.10 billion, positioned close to its GF Value of $130.13, suggesting a fairly valued status.
Understanding GF Value
The GF Value is a proprietary measure reflecting the intrinsic value of a stock, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Ross Stores, the GF Value suggests the stock is fairly valued, indicating that its market price aligns closely with its estimated fair value. This alignment suggests that the long-term return of Ross Stores should closely mirror the rate of its business growth.
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Financial Strength and Stability
Investing in companies with robust financial strength reduces the risk of capital loss. Ross Stores showcases a cash-to-debt ratio of 0.85, ranking favorably within its industry. This solid financial positioning supports a GuruFocus financial strength rating of 7 out of 10.
Profitability and Growth Prospects
Ross Stores has demonstrated strong profitability with an operating margin of 11.33%, outperforming 82.09% of its industry peers. The company's consistent profitability over the past decade and impressive growth metrics, such as a 19.6% average annual revenue growth over three years, underline its robust financial health and expansion potential.
Efficiency in Capital Utilization
Comparing Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) provides insight into financial efficiency. Ross Stores' ROIC of 23.44 significantly exceeds its WACC of 9.27, indicating effective capital management.
Conclusion
Overall, Ross Stores (ROST, Financial) appears to be fairly valued, reflecting a balanced market perception that aligns closely with its financial health and growth prospects. For investors seeking deeper insights or considering an investment, further exploration of Ross Stores' detailed financials is recommended.
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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.
