Ross Stores, Inc. (ROST): what the price assumes

In the published model solve dated 2026-Q2, anchored at $228.55, Ross Stores, Inc. (ROST) is priced for +21.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/ROST

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.2% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

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.

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)

Solvency

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.)
• FY2025 10-K: …and/or encourage frequent customer visits and/or cross-shopping of our multiple retail banners, any of which could adversely affect our results. Customers also may have expectations about how they shop in stores or through e-commerce or more generally engage with businesses across different channels (including…
• FY2025 10-K: …by third parties. 7 Store Growth Expansion of our business through the addition of new stores continues to be an important part of our global growth strategy. The following table provides store growth information for our divisions for the two most recently completed fiscal years, as well as our estimates of the…
• GAP (GAP, INC)
• FY2025 10-K: …preferences and practices, including the increasing shift to digital brand engagement, social media communication, and digital shopping; • developing innovative, high-quality products in sizes, colors, and styles that appeal to customers of varying demographics and tastes; • purchasing and stocking merchandise to…
• FY2025 10-K: …transactions and demand for our merchandise are influenced by our marketing efforts. We use various marketing channels to drive customer awareness and consideration of and interest in shopping our brands with the aim of increasing sales, and we are increasingly using digital advertising to drive sales and traffic to…
• AEO (American Eagle Outfitters, Inc.)
• FY2025 10-K: …of climate change, the availability of import quotas, transportation disruptions and foreign currency exchange rate fluctuations, could adversely affect our business and cause our results of operations to fluctuate. We operate in a highly competitive industry, and we face significant pricing pressures from existing…
• FY2025 10-K: …a sufficient number of qualified senior managers and other key personnel. We must also attract, develop, and retain a sufficient number of qualified field and distribution center personnel. Competition for talent is intense and the turnover rate in the retail industry is generally high, and we cannot be sure that we…
• ANF (Abercrombie & Fitch Co.)
• FY2025 10-K: …its competition through product, providing high quality and newness; brand voice, amplifying and consolidating brand messaging; and experience, investing in immersive, participatory omnichannel shopping environments. Operating in a highly competitive industry environment can cause the Company to engage in greater…
• FY2025 10-K: …in competition from established companies. These increases in competition could reduce our ability to retain and grow sales, resulting in an adverse impact to our operating results and business. We face a variety of challenges in the highly competitive and constantly evolving retail industry, including: •…
• URBN (Urban Outfitters, Inc.)
• FY2025 10-K: …in highly competitive domestic and international markets. Our Retail segment competes on the basis of, among other things, the location of our stores, website, mobile application and catalog presentation, website and mobile application design and functionality, the breadth, quality, style, price and availability of…
• FY2025 10-K: …Our Retail segment utilizes point-of-sale register systems connected by a secure data network to our home offices. Additionally, our stores have mobile point-of-sale devices that have virtually the same functionality as our cash registers. These systems provide for register efficiencies, timely customer checkout and…
• UAA (UNDER ARMOUR, INC.)
• FY2025 10-K: …of operations. We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenues and gross profit. The market for performance apparel, footwear and…
• FY2025 10-K: …in innovations around sustainability; and greater economies of scale. In addition, some of our competitors have long-term relationships with our key retail customers that are potentially more important to those customers because of the significantly larger volume and product mix that our competitors sell to them. As…
• AS (Amer Sports, Inc.)
• FY2025 20-F: …December 31, 2025, compared to the year ended December 31, 2024. Segment Adjusted Operating Profit in our Technical Apparel segment increased by 34.0% for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily driven by higher gross profit, partially offset by an…
• FY2025 20-F: …them exactly where they shop, across digital and physical spaces. We generate revenue from the sale of our products through direct-to-consumer and wholesale channels: • Direct-to-Consumer includes sales of our brands' products through (i) owned e-commerce websites and (ii) owned retail stores, which include elevated…
• LULU (lululemon athletica inc.)
• FY2025 10-K: …our technical product innovation. We also believe our ability to introduce new product innovations, combine function and fashion, and connect through in-store, online, and community experiences sets us apart from our competition. In addition, we believe our vertical retail distribution strategy and community-based…
• FY2025 10-K: …athletic apparel, including large, diversified apparel companies with substantial market share, and established companies expanding their production and marketing of technical athletic apparel, as well as against smaller retailers and those specifically focused on women's athletic apparel. We also face competition…

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.