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ROST – Market expectations are for Uniform ROA to compress, and management may have concerns about retail pricing, store expansion, and inventory management

April 6, 2022

  • Ross Stores (ROST) currently trades below corporate but near historical averages relative to Uniform earnings, with an 18.0x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to compress to 14%, accompanied by 5% Uniform asset growth.
  • Meanwhile, analysts expect Uniform ROA to remain stable at 18% in 2024, accompanied by 4% Uniform asset growth.
  • If sustained going forward, these levels would imply a stock price closer to $120, representing 32% equity upside for the firm.
  • Moreover, the firm’s most recent earnings call suggests management may have concerns about retail pricing, store expansion, and inventory management.
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