Ross Stores currently trades at $145.25 per share and has shown little upside over the past six months, posting a middling return of 2.8%.
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 Ross Stores 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 Positive Attributes:
1. Store Growth Signals an Offensive Strategy
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Ross Stores sported 2,205 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 4.2% annual growth, among the fastest in the 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 show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.
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 3.5% per year.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Ross Stores’s 5.8% annualized revenue growth over the last six years was tepid. 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 has huge potential even though it has some open questions, but at $145.25 per share (or 22.1× forward P/E), is now the right time to buy the stock? See for yourself in our full research report, it’s free.
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