The firm said it lowered its rating on the apparel and home fashion retail chain due to the company's struggle to balance margins and traffic.
Sterne Agee cut its price target on Ross Stores stock to $68 from $81.
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Shares of Ross Stores are lower -0.83% to $64.73 on Wednesday.
Separately, 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 revenue growth, growth in earnings per share, good cash flow from operations, increase in net income 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 analysis by TheStreet Ratings Team goes as follows:
- ROST's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ROSS STORES INC has improved earnings per share by 7.5% 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 $3.87 versus $3.53 in the prior year. This year, the market expects an improvement in earnings ($4.21 versus $3.87).
- Net operating cash flow has increased to $504.58 million or 42.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.46%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 4.0% when compared to the same quarter one year prior, going from $234.61 million to $243.91 million.
- 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 0.45 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full analysis from the report here: ROST Ratings Report