Ross Stores (ROST) operates a chain of off-price retail stores offering high-quality, in season name brand and designer apparel, shoes, cosmetics, accessories and home merchandise at discounts of 20-60% below mainstream retailers. The company has grown profits and dividends at a 15-20% annual rate over the past 10 years, earning a 25%+ return on equity. While current retail environment experienced difficulties in the recent recession, ROST's off-price business model continued to produce above-average results because:
The primary negative for this company is that retailing is an intensely competitive business.
ROST is rated A by Value Line, has a 10% debt-to-equity ratio and its stock yields 1.0%
Dividend Growth Rate
# Increases Since 2001
EPS Down Since 2001
Value Line Rating
*IND is the average of the Retail (Softlines) Industry as compiled from Value Line
Chart note: ROST stock made great progress off its December 2008 low, quickly surpassing the down trend off its September 2008 high (red line) as well as the November 2008 trading high (green line). Long term the stock is in an up trend (straight blue lines). It is also in an intermediate term up trend (purple lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio does not own a position in ROST, having Sold it at slightly lower levels. While the fundamentals of ROST are strong, we believe that it is being generously valued at its current price. Hence, we would avoid buying this overpriced stock at these levels.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.