Ross Stores (ROST:NAS) Fundamental Valuation Report


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Ross Stores $86.62 (USD) Close Price as of 21/06/2018

Based on the analysis conducted in this report, Ross Stores, (ROST:NAS) is found to be  Fairly valued to slightly Overvalued.

Company Ross Stores
Symbol:Exchange ROST:NAS
Industry Consumer Cyclical:Apparel Stores
Close Price/Date $86.62 (USD) 21/06/2018
Weighted Average Valuation $82.78 (USD)
Summary ROST:NAS is found to be  Fairly valued to slightly Overvalued by 4.4% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $87.17 (USD)
(in order of importance) Discounted Cash Flow: $74.35 (USD)
Comparables: $86.45 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Fairly valued on a Comparable Valuation basis
Asset Basis: Overvalued on an Asset Valuation basis

Valuation Details

Ross Stores Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for ROST:NAS

Using a discounted cash flow model we generated an intrinsic value of $74.35 (USD) for ROST:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

ROST:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $74.35 1% 5% 1% 5%
WACC (or Ke) 7.84 $93.41 $61.61
Terminal Growth Rate 2.80 $62.79 $91.63
Tax Rate 0.33 $80.44 $68.26
Cash Flow 2,851,774,800 $69.76 $78.94
Capital Expenditures
Long Term Debt 396,259,000 $74.40 $74.30

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $86.45 (USD) for ROST:NAS. We also generated a valuation of $73.33 (USD) using other metrics and comparables.
The comparable companies were Gap (GPS:NYS), L Brands (LB:NYS), Lululemon Athletica (LULU:NAS) and TJX Companies (TJX:NYS).

Company ROST:NAS End Date Value
Earnings/Share $3.84 (USD)
Book Value/Share $8.31 (USD)
Sales/Share $37.82 (USD)
Cash Flow/Share $4.28 (USD)
EBITDA/Share $6.22 (USD)
Price Based on Comps Adjustment Factor (%)
$102.14 (USD) -32.9
$71.67 (USD) 0.0
$90.51 (USD) 14.1
$76.99 (USD) 23.2
$76.63 (USD) 22.6
ROST:NAS Ratios Used Average Values GPS:NYS LB:NYS LULU:NAS TJX:NYS
22.56 PE Ratio 26.60 15.34 11.39 57.53 22.14
10.42 PB Ratio 8.62 4.09 0.00 10.33 11.44
2.29 PS Ratio 2.39 0.82 0.83 6.25 1.68
20.22 PCF Ratio 17.98 10.88 8.03 34.31 18.69
13.10 EV to EBITDA 12.48 6.36 6.75 24.42 12.38

Multiples

Using a multiples approach we generated a valuation of  $76.37 (USD) for ROST:NAS

Company ROST:NAS End Date Value
Earnings/Share $3.84 (USD)
Book Value/Share $8.31 (USD)
Sales/Share $37.82 (USD)
Cash Flow/Share $4.28 (USD)
EBITDA/Share $6.22 (USD)
Price Based on Comps Adjustment Factor
$86.55 (USD) 0
$76.78 (USD) 0
$73.40 (USD) 0
$71.36 (USD) 0
$73.76 (USD) 0
Ratios Ratio Average
PE Ratio 22.54
PB Ratio 9.24
PS Ratio 1.94
PCF Ratio 16.66
EV to EBITDA 11.85

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ROST:NAS for the last 10 years was  9.17

We ran the Adjusted Book Value for  ROST:NAS and generated a book value of  $8.25 (USD)
By multiplying these we get an adjusted valuation of  $75.62 (USD)

Analyst Data

In the Stockcalc database there are 6 analysts that provide a valuation for ROST:NAS. The 6 analysts have a concensus valuation for ROST:NAS for 2019 of $87.17 (USD).

ROST:NAS Ross Stores

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 3 0 4.0000 Outperform 2018-6-20

Current Price: not available

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 4.09 4.51 5.07
# EPS Analysts 6 6 1
Mean Revenue 14,749.60 15,681.80 17,050.50
# Revenue Analysts 4 4 1
Mean Target Price 87.17
Mean Cash Flow 5.28 5.71 6.71
Mean EBITDA 2,395.50 2,559.50 2,774.10
Mean Net Income 1,548.00 1,650.20 1,795.10
Mean Debt Outstanding -87.60 34.00 -2,469.80
Mean Tax Rate
Mean Growth Rate 10.57
Mean Capital Expenditure 437.90 459.10 511.50

Company Overview (ROST:NAS USD)

Price 86.62
Range 85.69 – 86.75
52 week 53.03 – 86.62
Open 86.12
Vol / Avg. 1.98M/6.13M
Mkt cap 32.66B
P/E 22.56
Div/yield 0.90/0.01
EPS 3.55
Shares 377.08M
Beta 0.80

Summary chart

Detailed Company Description

Ross Stores Inc is the off-price apparel and home fashion chains which is engaged in selling name-brand and designer apparel, accessories, footwear, and home fashions to middle-income consumers.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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