Ross Stores (ROST) Is Today's Water-Logged And Getting Wetter Stock

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.

Trade-Ideas LLC identified Ross Stores ( ROST) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ross Stores as such a stock due to the following factors:

  • ROST has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $147.2 million.
  • ROST has traded 1.0 million shares today.
  • ROST traded in a range 201.6% of the normal price range with a price range of $3.85.
  • ROST traded below its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on ROST:

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. The stock currently has a dividend yield of 0.9%. ROST has a PE ratio of 23. Currently there are 7 analysts that rate Ross Stores a buy, no analysts rate it a sell, and 12 rate it a hold.

The average volume for Ross Stores has been 1.3 million shares per day over the past 30 days. Ross Stores has a market cap of $20.9 billion and is part of the services sector and retail industry. The stock has a beta of 1.21 and a short float of 1.2% with 1.58 days to cover. Shares are up 7.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ross Stores as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 43.97% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ROST should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ROSS STORES INC has improved earnings per share by 17.6% 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 $4.42 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($4.80 versus $4.42).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 14.0% when compared to the same quarter one year prior, going from $217.95 million to $248.53 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ROST's debt-to-equity ratio is very low at 0.17 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 0.48 is very weak and demonstrates a lack of ability to pay short-term obligations.

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