Why Ross Stores (ROST) Stock Is Up After-Hours Thursday

NEW YORK (TheStreet) -- Ross Stores (ROST) was gaining 1.7% to $70.00 after-hours Thursday after meeting analysts' expectations for earnings and revenue in the first quarter.

For the first quarter Ross Stores reported earnings of $1.15 a share, in-line with the Capital IQ Consensus Estimate. Revenue grew 5.5% year-over-year to $2.68 billion for the quarter, Analysts expected revenue of $2.69 billion for the quarter.

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TheStreet Ratings team rates ROSS STORES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROSS STORES INC (ROST) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $340.78 million or 2.22% 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 -4.54%.
  • ROSS STORES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ROSS STORES INC increased its bottom line by earning $3.87 versus $3.53 in the prior year. This year, the market expects an improvement in earnings ($4.20 versus $3.87).
  • ROST's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.37 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • In its most recent trading session, ROST has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: ROST Ratings Report

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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.

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