Ross Stores has been on fire lately. In the past six months alone, the company’s stock price has rocketed 42.1%, reaching $223.09 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now still a good time to buy ROST? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Does ROST Stock Spark Debate?

Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.

Two Things to Like:

1. Surging Same-Store Sales Show Increasing Demand

Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Ross Stores’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.6% per year.

2. Stellar ROIC Showcases Lucrative Growth Opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Ross Stores’s five-year average ROIC was 31.6%, placing it among the best consumer retail companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Ross Stores grew its sales at a tepid 6.8% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about Ross Stores.

Final Judgment

Ross Stores’s positive characteristics outweigh the negatives, and with the recent surge, the stock trades at 30.1× forward P/E (or $223.09 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.

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