Ross Stores has been treading water for the past six months, recording a small loss of 1.6% while holding steady at $140.01.
Does this present a buying opportunity for ROST? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Does ROST Stock Spark Debate?
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.
Two Things to Like:
1. Store Growth Signals an Offensive Strategy
A retailer’s store count often determines how much revenue it can generate.
Ross Stores operated 2,186 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 4.2% annual growth, much 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 an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Ross Stores’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.6% per year.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Ross Stores grew its sales at a tepid 5.7% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about Ross Stores. 
Final Judgment
Ross Stores’s positive characteristics outweigh the negatives, but at $140.01 per share (or 20.9× forward P/E), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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