Here's Why We Think Ross Stores (NASDAQ:ROST) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Ross Stores (NASDAQ:ROST). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Ross Stores

Ross Stores' Improving Profits

Ross Stores has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Ross Stores' EPS soared from US$4.41 to US$5.59, over the last year. That's a commendable gain of 27%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Ross Stores maintained stable EBIT margins over the last year, all while growing revenue 8.9% to US$20b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Ross Stores' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Ross Stores Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$45b company like Ross Stores. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$919m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Ross Stores Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Ross Stores' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Ross Stores' continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You still need to take note of risks, for example - Ross Stores has 1 warning sign we think you should be aware of.

Although Ross Stores certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.