Let's talk about the popular Ross Stores, Inc. (NASDAQ:ROST). The company's shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$113 at one point, and dropping to the lows of US$101. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ross Stores' current trading price of US$103 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ross Stores’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Ross Stores Worth?
According to my valuation model, Ross Stores seems to be fairly priced at around 14% below my intrinsic value, which means if you buy Ross Stores today, you’d be paying a fair price for it. And if you believe the company’s true value is $119.78, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Ross Stores’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will Ross Stores generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Ross Stores' earnings over the next few years are expected to increase by 32%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ROST’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on ROST, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Ross Stores as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Ross Stores has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Ross Stores, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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