Is Ross Stores, Inc. (NASDAQ:ROST) Potentially Undervalued?

Let’s talk about the popular Ross Stores, Inc. (NASDAQ:ROST). The company’s shares saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$122 and falling to the lows of US$109. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ross Stores’s current trading price of US$114 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ross Stores’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Ross Stores

What is Ross Stores worth?

According to my valuation model, Ross Stores seems to be fairly priced at around 17% below my intrinsic value, which means if you buy Ross Stores today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $137.37, then there isn’t much room for the share price grow beyond what it’s currently trading. What’s more, Ross Stores’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Ross Stores?

NasdaqGS:ROST Past and Future Earnings, January 31st 2020
NasdaqGS:ROST Past and Future Earnings, January 31st 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Ross Stores’s earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? ROST’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on ROST, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Ross Stores. You can find everything you need to know about Ross Stores in the latest infographic research report. If you are no longer interested in Ross Stores, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.