I recently wrote an article for a financial publication discussing why Ross Stores (ROST) represents a good investment. At a high level,
1. Ross has has been around for about 35 years and their 'formula' has worked quite well for that entire duration (with occasional ups and downs that face all businesses). All of its growth has been 'organic'. Yet, Ross is currently in 38 states with dd’s DISCOUNTS in 17 states. There's a long runway.
2. Return economics on new stores are terrific, which translates to a very high return on equity. (Ross does not have material intangibles). Hence, the above-mentioned long runway can be pursued profitably.
3. Same store sales are good and will continue to be so.
4. Excess cash flow is used to pay dividends and repurchase shares. Since the business is attractive, the valuation is reasonable, both these uses leave shareholders better off. Lack of M&A reduces chances of misapplication of capital.
5. Even though the valuation is 'fair' and not cheap (at $77 per share), the current price will likely provide better than market returns over time.
For more details, including numbers, please see link below:
1. Ross has has been around for about 35 years and their 'formula' has worked quite well for that entire duration (with occasional ups and downs that face all businesses). All of its growth has been 'organic'. Yet, Ross is currently in 38 states with dd’s DISCOUNTS in 17 states. There's a long runway.
2. Return economics on new stores are terrific, which translates to a very high return on equity. (Ross does not have material intangibles). Hence, the above-mentioned long runway can be pursued profitably.
3. Same store sales are good and will continue to be so.
4. Excess cash flow is used to pay dividends and repurchase shares. Since the business is attractive, the valuation is reasonable, both these uses leave shareholders better off. Lack of M&A reduces chances of misapplication of capital.
5. Even though the valuation is 'fair' and not cheap (at $77 per share), the current price will likely provide better than market returns over time.
For more details, including numbers, please see link below:
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