Ross Stores Looks Undervalued: Is Now the Time to Buy the Stock?

Core Viewpoint - Ross Stores, Inc. (ROST) is trading at a discount compared to its industry peers, with a forward P/E ratio of 21.41X, significantly lower than the industry average of 31.61X, making it an attractive opportunity for long-term, value-focused investors [1][4]. Valuation Comparison - ROST's valuation is compelling when compared to major discount retailers such as Costco (51.07X), Burlington (23.14X), and TJX (27.93X) [4]. Stock Performance - ROST stock has shown a growth of 9.3% over the past month, outperforming the broader Retail-Wholesale sector's decline of 0.2% and the Zacks Retail - Discount Stores industry's growth of 3% [5]. - In comparison, peers like TJX and Costco gained 3.9% and 3.3%, while Burlington lost 6.4% during the same period [6]. Sales Growth - ROST experienced a 3% improvement in comparable store sales in Q4 fiscal 2024, driven by increased customer traffic and larger basket sizes, resulting in a year-over-year sales growth of 3% [10]. - The company's business model focuses on competitive bargains and off-price retailing, which has helped maintain its appeal across various economic conditions [11][12]. Expansion Plans - ROST plans to open 19 new stores in Q1 fiscal 2025, including 16 Ross and 3 dd's DISCOUNTS, with an overall target of approximately 90 new locations for fiscal 2025 [13]. Earnings Estimates - The Zacks Consensus Estimate for ROST's earnings per share has increased by 1.4% and 7.8% for fiscal 2025 and 2026, respectively [14]. Near-Term Challenges - Despite its strengths, ROST faces challenges due to macroeconomic volatility, rising inflation, and geopolitical uncertainty, which have affected consumer confidence and discretionary spending [15][16]. - For Q1 fiscal 2025, ROST anticipates comparable store sales to be flat to down by 3%, with total sales projected to decline by 1% to increase by 3% year-over-year [16][17]. Strategic Focus - ROST's strategy emphasizes value-oriented off-price retailing, delivering branded and designer goods at discounted prices, which has helped maintain its competitive advantage [19].