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Ross Stores Inc. Stock Buy Recommendation Reiterated (ROST)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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, revenue growth, notable return on equity, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. 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 15.1% 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 $3.53 versus $2.86 in the prior year. This year, the market expects an improvement in earnings ($3.89 versus $3.53).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 17.7%. Since the same quarter one year prior, revenues slightly increased by 7.8%. 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 increased to $352.86 million or 18.67% when compared to the same quarter last year. In addition, ROSS STORES INC has also modestly surpassed the industry average cash flow growth rate of 12.05%.
  • ROST's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that ROST's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.

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. It primarily offers apparel, accessories, footwear, and home fashions for the entire family. Ross Stores has a market cap of $14.4 billion and is part of the services sector and retail industry. Shares are up 22.1% year to date as of the close of trading on Thursday.

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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