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What Should We Expect From Ross Stores, Inc.'s (NASDAQ:ROST) Earnings In The Years Ahead?

In February 2019, Ross Stores, Inc. (NASDAQ:ROST) released its most recent earnings announcement, which signalled that the company gained from a robust tailwind, eventuating to a double-digit earnings growth of 16%. Below, I've presented key growth figures on how market analysts perceive Ross Stores's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Ross Stores

Market analysts' prospects for the upcoming year seems rather subdued, with earnings rising by a single digit 3.0%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 10% compared to today’s earnings, and finally hitting US$1.9b by 2022.

NasdaqGS:ROST Past and Future Earnings, April 23rd 2019
NasdaqGS:ROST Past and Future Earnings, April 23rd 2019

Even though it’s useful to be aware of the growth rate each year relative to today’s level, it may be more insightful estimating the rate at which the company is moving on average every year. The pro of this approach is that it ignores near term flucuations and accounts for the overarching direction of Ross Stores's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 6.9%. This means that, we can assume Ross Stores will grow its earnings by 6.9% every year for the next few years.

Next Steps:

For Ross Stores, there are three essential aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Valuation: What is ROST worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ROST is currently mispriced by the market.

  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ROST? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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