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Ross Stores Inc. Stock Buy Recommendation Reiterated (ROST)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Ross Stores (Nasdaq:ROST) has been reiterated by TheStreet Ratings as a buy with a ratings score of A . The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • ROSS STORES INC has improved earnings per share by 26.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ROSS STORES INC increased its bottom line by earning $2.86 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($3.48 versus $2.86).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Specialty Retail industry average. The net income increased by 22.8% when compared to the same quarter one year prior, going from $148.28 million to $182.02 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 12.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, ROSS STORES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 71.48% to $206.83 million when compared to the same quarter last year. In addition, ROSS STORES INC has also vastly surpassed the industry average cash flow growth rate of -21.08%.

Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names in the United States. The company has a P/E ratio of 20.5, equal to the average retail industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Ross Stores has a market cap of $14.77 billion and is part of the services sector and retail industry. Shares are up 38.7% year to date as of the close of trading on Wednesday.

You can view the full Ross Stores Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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