Shares of Ross Stores (ROST) have been strong performers lately, with the stock up 6% over the past month. The stock hit a new 52-week high of $116.03 in the previous session. Ross Stores has gained 38.6% since the start of the year compared to the 23.1% move for the Zacks Retail-Wholesale sector and the 47.4% return for the Zacks Retail - Discount Stores industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 21, 2019, Ross Stores reported EPS of $1.03 versus consensus estimate of $0.97.
For the current fiscal year, Ross Stores is expected to post earnings of $4.57 per share on $15.99 billion in revenues. This represents a 7.28% change in EPS on a 6.75% change in revenues. For the next fiscal year, the company is expected to earn $4.95 per share on $16.98 billion in revenues. This represents a year-over-year change of 8.28% and 6.14%, respectively.
Ross Stores may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Ross Stores has a Value Score of C. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 25.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 22.3X versus its peer group's average of 18.3X. Additionally, the stock has a PEG ratio of 2.4. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Ross Stores currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Ross Stores fits the bill. Thus, it seems as though Ross Stores shares could have potential in the weeks and months to come.
How Does Ross Stores Stack Up to the Competition?
Shares of Ross Stores have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Dollar General (DG), Burlington Stores (BURL), and Costco Wholesale (COST), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 4% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Ross Stores, even beyond its own solid fundamental situation.
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Ross Stores, Inc. (ROST) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
Dollar General Corporation (DG) : Free Stock Analysis Report
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