Stock market crashes are an opportune time to buy. High quality companies, such as Ross Stores, Inc., are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.
Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brands. Established in 1982, and run by CEO Barbara Rentler, the company employs 88.10k people and with the company’s market capitalisation at US$38b, we can put it in the large-cap category. Typically, large companies are well-established and highly resourced, meaning that stock market volatility may impact some short-term strategic decisions but unlikely to matter in the long run. Therefore, large-cap stocks are a safe bet to buy more of when the general market is selling off.
Ross Stores currently has US$313m debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With interest income higher than interest payments, meeting these short-term debt obligations isn’t a problem for Ross Stores. Furthermore, its cash flows from operations copiously covers it debt by more than 2x, which is higher than the bare minimum requirement of 0.2x. Not to mention, it meets the basic liquidity requirement with current assets exceeding liabilities, which further builds on its financial strength in the face of a volatile market.
ROST’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 13%, overtaking the industry growth rate of 8.0%. It has also returned an ROE of 49% recently, above the industry return of 13%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Ross Stores as a long-term hold.
Next Steps:Ross Stores makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Ross Stores? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
- Future Outlook: What are well-informed industry analysts predicting for ROST’s future growth? Take a look at our free research report of analyst consensus for ROST’s outlook.
- Valuation: What is ROST worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ROST is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.