Ross Stores, Inc. (ROST): what the price requires
At today's price, Ross Stores, Inc. (ROST) is priced for +22.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ROST
Headline
| Field | Value |
|---|---|
| Ticker | ROST |
| Company | Ross Stores, Inc. |
| Current price | $219.03/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 6.3% |
| Operating margin today | 12.2% |
| Margin compression implied | -5.9pp |
| Implied growth | 22.9% |
| Multiple paid | 26x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.9pp.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| cohort percentile (of 210 peers) | 73 |
| sustained it ~5 years at this level | 33% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.81x | 5 | expensive |
| Earnings | 2.76x | 5 | expensive |
| Relative | 1.51x | 5 | expensive |
| Growth | 0.97x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $226.25 | 0.97x | yes | FCF base $2.9B, growth 12% (input: historical growth), terminal g 4.0%, WACC 8.9%, 6yr projection |
| DCF Exit Multiple | Growth | $256.12 | 0.86x | yes | Exit EV/EBITDA: 18.8x / 20.8x / 22.8x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $166.72 | 1.31x | yes | P/E 23.11x (blended: static sector reference 20x + trailing (TTM) 30x), scenarios: 19.1x / 23.1x / 27.2x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $77.94 | 2.81x | yes | BV/sh $19.63, ROE (TTM) 36.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $168.07 | 1.30x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $201.96 | 1.08x | yes | Rev $23.8B, growth 12% (input: historical growth; tapered), Terminal P/S: 2.4x / 3.0x / 3.5x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $96.69 | 2.27x | yes | EPS $7.16, growth 14% (input: historical EPS growth), PEG=2.25 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $30.52 | 7.18x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.22B × (1−22%) / WACC 8.9% → EPV (no growth) |
| Residual Income | Asset | $122.18 | 1.79x | yes | BV $19.63 + 5yr PV of (ROE (TTM) 36.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $56.23 | 3.90x | yes | √(22.5 × EPS $7.16 × BVPS $19.63) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $146.93 | 1.49x | yes | EBITDA $3.43B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $85.99 | 2.55x | yes | FCF $2632.3M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $79.43 | 2.76x | yes | SBC-adj FCF $2.44B (FCF $2.63B − SBC $0.20B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $213.08 | 1.03x | yes | EPS $7.16 × (8.5 + 2×13.5%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $19.29 | 11.35x | yes | BV $19.63 × (ROIC 8.7% / WACC 8.9%) |
| P/Sales Sector | Relative | $111.02 | 1.97x | yes | Revenue $23.78B × sector P/S 1.5x |
| PEG Fair Value | Relative | $145.04 | 1.51x | yes | EPS $7.16 × (PEG 1.5 × growth 13.5% (input: historical EPS growth)) → PE 20.3x |
| Earnings Yield | Earnings | $77.41 | 2.83x | yes | EPS $7.16 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $3.1b |
| Net debt / NOPAT (after-tax) | -1.49x (net cash) |
| Net debt / operating income (pre-tax) | -1.15x (net cash) |
| Share count CAGR (buyback) | -2.0% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Ross runs the off-price model at scale on a $23.8B revenue base, turning opportunistic buying into a 12% operating margin and a 36.7% return on equity, with a net cash position and a share count falling about 2% a year.
- The most recent quarter delivered comparable store sales up 17%, the strongest in the company's roughly 40-year history, on total sales of $6.0 billion.
- The watch item is tariffs: management flagged a $0.11 to $0.16 per share headwind in Q2 2026 from federal trade policy and excluded any tariff refunds from guidance.
Bull Case
The earnings trajectory just did something Ross had never done. Q1 2026 total sales rose 21% to $6.0 billion, comparable store sales grew 17%, the strongest same-store quarter in the company's roughly four-decade history, and diluted EPS of $2.02 beat expectations. A 17% comp from a mature off-price chain is not a normal retail number; it says the value proposition is pulling traffic at a moment when full-price retail is under pressure. When budgets tighten, the off-price store fills up.
The model underneath is what makes that durable. Ross buys closeout and opportunistic merchandise and sells it well below department-store prices, and the filing is candid that the hard part is execution: it must "buy and sell merchandise that meets customer demand" consistently across diverse categories, which is precisely the skill that does not scale to new entrants overnight. The result is a 12% operating margin and a 36.7% return on equity on a $23.8 billion revenue base. The treasure-hunt format also insulates Ross from the e-commerce pressure that has hollowed out fixed-assortment apparel; you cannot replicate a constantly-changing bargain rack online at the same economics.
Capital discipline closes the loop. Ross carries net cash, roughly $3.1 billion more in liquid assets than debt, and the share count has fallen about 2% a year, so earnings per share get a steady tailwind from buybacks on top of operating growth. Management lifted full-year comparable-sales guidance to 6% to 7% after the quarter. A business that compounds high returns on equity, returns cash without leverage, and gains share when the consumer trades down is the kind of compounder the market pays up to own.
Bear Case
The bear case turns on what the price now requires the company to keep doing. At about 28 times operating income, the market is paying for company-wide operating profit to compound near 26% a year for five years, a pace that sits at the very top of the off-price peer distribution and well beyond the upper quartile. Ross earns a 12% operating margin today. The 17% comp that justified the re-rating is, by management's own guidance, not the run rate; the company guided full-year comparable sales to 6% to 7%, a quarter of the pace that lit up the print. The price is extrapolating a peak quarter into a multi-year trajectory the company is not promising.
The most fragile assumption is the one tied to the macro that produced the great quarter. Off-price thrives when consumers trade down, which means the same recession fear that fills Ross stores also pressures the discretionary spending those stores depend on. Comps that surge 17% in one window can normalize hard in the next, and a single soft season would collide with a multiple priced for sustained acceleration. The filing names the competitive reality plainly: "Competitive pressures in the apparel and home-related merchandise retailing industry are high" in a fragmented marketplace where many retailers fight for the same share.
Then there is the cost side the company cannot control. Management warned of a $0.11 to $0.16 per share tariff impact in Q2 2026 from federal trade policy changes and excluded any potential refund from guidance. Off-price runs on imported merchandise, so tariffs hit the cost of goods directly, and a model whose entire appeal is price has limited room to pass higher costs to a bargain-seeking customer. The balance sheet is a genuine cushion, net cash with no leverage to worry about, but net cash bounds the downside; it does not justify paying a top-of-cohort multiple for a peak comp that management has already guided down from.
Valuation
At about 28 times operating income, the price is making an aggressive bet. Inverted, it asks company-wide operating profit to grow near 26% a year for five years, against a current operating margin of about 12%. That implied pace sits at the very top of the off-price peer distribution, beyond the upper quartile, and only roughly three in ten comparable fast-growers have sustained that kind of run even five years. The recent 17% comp shows Ross can put up an extraordinary quarter; the price asks whether it can put up extraordinary years.
The methods agree the price leans on growth and only growth. The asset-value methods land roughly three times below the price, the earnings-power methods nearly three times below, and the peer-multiple methods below it as well; the relative read blends a sector multiple near 20 times against a trailing multiple near 32 times. Only the forward-growth methods reach the price, which is the signature of a quality compounder being valued for durability the static frames structurally cannot credit. The high return on equity, 36.7% trailing, is what the growth methods are extrapolating; the question is how long that return survives a normalizing comp and a tariff drag.
Solvency is unambiguously a strength and bounds the downside cleanly. Ross holds net cash, about $3.1 billion more in liquid assets than its roughly $1.0 billion of debt, so there is no financing risk under any plausible scenario, and the falling share count is real buyback deployment showing up where it cannot be faked. The decisive point is not the balance sheet, which is pristine; it is that a top-of-cohort multiple is underwriting a continuation of the best quarter in the company's history, and management has guided the next several quarters back toward a mid-single-digit comp.
Catalysts
The Q1 2026 print was the catalyst, and it was a large one. Total sales rose 21% to $6.0 billion, comparable store sales grew 17%, the strongest same-store quarter in the company's roughly 40-year history, and diluted EPS of $2.02 topped expectations. The strength came as value-seeking traffic flowed into the off-price format, the structural tailwind that benefits Ross when the broader consumer turns cautious.
Management raised its outlook on the back of the quarter, guiding full-year 2026 comparable store sales to 6% to 7% growth and Q2 comparable sales to 6% to 7% for the 13 weeks ending August 1, 2026. The gap between the 17% just delivered and the 6% to 7% guided is itself the story: management is signaling that the surge normalizes from here, which makes each subsequent comp print a test of how much of the strength persists.
The live overhang is trade policy. The company guided a $0.11 to $0.16 per share tariff impact for Q2 2026 from federal trade changes and has submitted refund claims, but excluded any reimbursement from guidance given timing uncertainty. Resolution of those refund claims would be upside; further tariff escalation on imported merchandise is the most direct risk to the margin. The next comp print and any clarity on tariff reimbursement are the two events that move the story.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- TJX (THE TJX COMPANIES, INC.)
- (no filing in the citation store)
- GAP (GAP, INC)
- (no filing in the citation store)
- AEO (American Eagle Outfitters, Inc.)
- (no filing in the citation store)
- ANF (Abercrombie & Fitch Co.)
- (no filing in the citation store)
- URBN (Urban Outfitters, Inc.)
- (no filing in the citation store)
- UAA (UNDER ARMOUR, INC.)
- (no filing in the citation store)
- AS (Amer Sports, Inc.)
- (no filing in the citation store)
- LULU (lululemon athletica inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Ross Stores Q1 2026 earnings release, May 2026