The firm said it slashed its rating on the off-price apparel and home furnishing chain based on its belief "consensus estimates are too high."
"The stock has benefitted from a flight to quality, and we do not expect Ross Stores to live up to expectations in [the second half of the year] and 2015," Canaccord said,
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The firm also said Ross Stores shares "appear overvalued" due to the firm's long term growth projections.
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, increase in net income, good cash flow from operations and increase in stock price during the past year. 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 1.5%. Since the same quarter one year prior, revenues slightly increased by 7.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ROSS STORES INC has improved earnings per share by 16.3% 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 ($4.26 versus $3.87).
- 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 12.4% when compared to the same quarter one year prior, going from $213.12 million to $239.56 million.
- Net operating cash flow has increased to $237.21 million or 32.17% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.78%.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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