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Ross (ROST) Appears Bright: Should You Hold the Stock?


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Taking a look at Ross Stores Inc. (ROST - Analyst Report) may be beneficial for investors who believe in holding on to stocks that possess enough factors to appear promising for the long term. The Pleasanton, CA-based Ross Stores, flaunting a long-term EPS growth rate of 23.4%, clearly fits the criteria. Let’s see how.

Ross Stores’ stock price history reveals that the company hasn’t been a disappointment in a long time. This is quite prominent from the 18.5% and 34.3% surge in Ross Stores’ shares on a year-to-date and year-over-year basis, respectively. We believe that this rally has been driven by the company’s impressive earnings history and solid growth strategies.

Starting with Ross Stores’ past performance, we note that its earnings and sales have outperformed the Zacks Consensus Estimate in eight out of the past nine quarters. In the last reported quarter, the company’s top and bottom lines surpassed estimates, alongside improving year over year, backed by impressive dd’s DISCOUNTS performance as well as the improvement brought about in the ladies’ apparel business, which remained troubled in the spring season.

ROSS STORES Price and Consensus

ROSS STORES Price and Consensus | ROSS STORES Quote

However, going forward, management expects to face some challenges related to strong comparisons, amid macroeconomic uncertainty and a volatile retail landscape. Also, the company faces intense competition from other departmental stores, which also poses a concern.

Nonetheless, the company’s raised earnings outlook for fiscal 2016, coupled with a robust third- and fourth-quarter view, reflects its confidence in performing well in the year ahead. This in itself speaks volumes about the company’s inherent strength and strategic endeavors.

Ross Stores’ key strategy to keep itself on the growth trajectory is continued focus on merchandising organization through investments in workforce, processes and technology. Additionally, the company continues to invest in its off-price business model as the competitive bargains it offers help make its stores attractive destinations for customers in all economic scenarios.

Also, Ross Stores remains on track with respect to its store expansion program. Evidently, the company opened 5 dd’s DISCOUNTS stores over the last weekend, totally gearing up to achieve its fiscal 2016 target of opening 90 stores, comprising 70 Ross Dress For Less and 20 dd's DISCOUNTS.

We expect the aforementioned factors to help this Zacks Rank #3 (Hold) company to sustain its strong momentum and stay afloat even amid difficult times. Hence, we suggest investors to hold on to the stock as the rest is a wait-and-watch story.

Stocks that Warrant a Look

Some better-ranked stocks in the retail sector include Burlington Stores Inc. (BURL - Snapshot Report) , Big Lots Inc. (BIG - Analyst Report) and L Brands Inc. (LB - Analyst Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Burlington Stores, which has a positive record of earnings surprises in the trailing four quarters with an average beat of 16.1%, has seen positive estimate revisions in the last 30 days.

Big Lots has an average earnings beat of 8% in the last four quarters and estimates have witnessed an uptrend in the last 30 days.

L Brands has to its credit a favorable surprise trend with an average beat of 3.8% in the trailing four quarters and the estimates have moved up in the last 60 days.

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