When Ross Stores, Inc. (NasdaqGS:ROST) released its most recent earnings update (03 August 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Ross Stores's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not ROST actually performed well. Below is a quick commentary on how I see ROST has performed.
How Did ROST's Recent Performance Stack Up Against Its Past?
ROST's trailing twelve-month earnings (from 03 August 2019) of US$1.6b has increased by 5.3% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 13%, indicating the rate at which ROST is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Ross Stores has invested its equity funds well leading to a 49% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 17% exceeds the US Specialty Retail industry of 5.6%, indicating Ross Stores has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Ross Stores’s debt level, has declined over the past 3 years from 49% to 32%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 7.2% to 9.5% over the past 5 years.
What does this mean?
Though Ross Stores's past data is helpful, it is only one aspect of my investment thesis. While Ross Stores has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Ross Stores to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ROST’s future growth? Take a look at our free research report of analyst consensus for ROST’s outlook.
- Financial Health: Are ROST’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 03 August 2019. This may not be consistent with full year annual report figures.
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 email@example.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.