Buy or Sell Ross Stores Stock Before Earnings?

by Rob Otman
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Ross Stores (Nasdaq: ROST) is a $22 billion company today. Investors that bought shares one year ago are sitting on a -6.99% total return. That's below the S&P 500's return of 15.85%.

Ross Stores stock is underperforming the market. It's beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Ross Stores reported a recent EPS growth rate of 13.7%. That's below the specialty retail industry average of 22.68%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the specialty retail industry is 22.88. And Ross Stores’ ratio comes in at 19.19. It's trading at a better value than many of its competitors.

Debt-to-Equity The debt-to-equity ratio for Ross Stores stock is 14.28%. That's below the specialty retail industry average of 79.92%. The company is less leveraged.

Free Cash Flow per Share Growth Ross Stores’ FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of Ross Stores comes in at 9.71% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Ross Stores’ profit margin is above the specialty retail average of 6.08%. So that's a positive indicator for investors.

Return on Equity Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Ross Stores is 43.18%, and that's above its industry average ROE of 18.94%.

Ross Stores stock passes five of our six key metrics today. That's why our Investment U Stock Grader rates it as a Strong Buy.

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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

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