ROST Ross Stores
A disciplined scale retailer with durable economics, but the price assumes implausibly rapid long-term growth.
The business
Ross operates off-price apparel and home-goods stores, buying excess branded inventory opportunistically and selling it at substantial discounts. It earns money through rapid inventory turnover, disciplined purchasing, and a low-cost, no-frills store model.
Quality gate · 88/100
Moat & management
| Moat | narrow moat |
| Source | scale |
| Trajectory | stable |
| Management | excellent |
Purchasing scale, vendor relationships, merchandising expertise, and a nationwide distribution network are difficult for smaller rivals to replicate. The moat is durable but constrained by strong off-price competitors and fashion-retail uncertainty.
Management has expanded stores methodically, maintained modest leverage, and reduced share count without compromising operations. Reinvestment has produced consistently high returns on capital.
Owner-earnings inputs
| Owner earnings (TTM) | 2.32B |
| Owner-earnings yield | 3.3% |
| Free-cash-flow yield | 3.8% |
| Growth used (normalized) | 7.0% |
| Market-implied growth (reverse DCF) | 12.7% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 2.48B | 7.0% | 2.27B |
| 2 | 2.64B | 6.7% | 2.23B |
| 3 | 2.81B | 6.4% | 2.17B |
| 4 | 2.99B | 6.1% | 2.12B |
| 5 | 3.16B | 5.9% | 2.06B |
| 6 | 3.34B | 5.6% | 1.99B |
| 7 | 3.51B | 5.3% | 1.92B |
| 8 | 3.69B | 5.0% | 1.85B |
| 9 | 3.86B | 4.7% | 1.78B |
| 10 | 4.04B | 4.4% | 1.70B |
| 11 | 4.20B | 4.1% | 1.63B |
| 12 | 4.36B | 3.9% | 1.55B |
| 13 | 4.52B | 3.6% | 1.47B |
| 14 | 4.67B | 3.3% | 1.40B |
| 15 | 4.81B | 3.0% | 1.32B |
Key risks
- Consumers shifting spending away from apparel
- Merchandising mistakes or reduced availability of attractive closeout inventory
- Wage, freight, and occupancy inflation compressing margins
Catalysts
- Continued store expansion in underpenetrated markets
- Sustained buybacks and operating leverage from revenue growth
Recent news
score · 8 articles
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- Exceptional Results Drive Growth at Ross Stores (ROST)
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- Ross Stores (ROST) Rose on a Favorable Consumer Environment
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~13%/yr owner-earnings growth over 15y (reverse DCF); model credits 7%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.