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TD Cowen has shown confidence in Ross Stores, Inc. (NASDAQ: NASDAQ:ROST) by increasing its price target to $185 from the previous $173 while maintaining a Buy rating on the stock. The firm's decision is based on the potential for second-half earnings to surpass guidance due to the benefits of merchandising improvements.
The firm asserts that these enhancements are likely to contribute to financial performance that exceeds current market expectations. According to TD Cowen, Ross Stores' current valuation does not reflect its growth and return on invested capital (ROIC) potential, especially when compared to peer company TJX Companies Inc (NYSE:TJX).
TD Cowen has applied a multiple of 26 times its fiscal year 2025 estimated earnings per share (EPS) to arrive at the new price target. This adjustment suggests a strong belief in the future earnings capacity of Ross Stores.
The analyst from TD Cowen highlighted the narrow valuation gap between Ross Stores and TJX, indicating a belief that Ross Stores could see a near-term increase in its stock price. The firm suggests that the market may not fully appreciate the similarities in growth and ROIC profiles between the two companies.
In other recent news, Ross Stores' second-quarter earnings per share surged to $1.59, surpassing analyst estimates, and revenue increased by 7% year-over-year, reaching $5.3 billion. BMO Capital Markets, UBS, Baird, and Goldman Sachs have all raised their price targets for Ross Stores, indicating confidence in the company's operational excellence and ability to surpass market expectations.
Ross Stores' management has also upgraded its full-year earnings per share forecast to $6.00-$6.13, reflecting the second-quarter performance and anticipated operational efficiencies in the forthcoming periods. Deutsche Bank has also increased its price target for Ross Stores, reflecting the company's successful strategy of offering a greater mix of branded merchandise at competitive prices.
InvestingPro Insights
Following the positive assessment by TD Cowen, a closer look at Ross Stores, Inc. (NASDAQ:ROST) through InvestingPro metrics and tips provides additional context for investors. With a robust market capitalization of $50.88 billion, Ross Stores exhibits stability in the retail sector. The company’s P/E ratio stands at 25.63, suggesting a reasonable valuation given its near-term earnings growth potential. Notably, Ross Stores has a history of rewarding shareholders, having increased its dividend for three consecutive years and maintained dividend payments for an impressive 31 years.
InvestingPro Tips highlight that Ross Stores is trading at a low P/E ratio relative to its earnings growth, indicating that the stock could be undervalued. Additionally, its stock generally trades with low price volatility, providing a level of predictability for investors. These factors, coupled with the company's position as a prominent player in the Specialty Retail industry, underscore the potential for continued financial health and shareholder value.
For those seeking more detailed analysis, InvestingPro offers an additional 13 tips that delve into the company's financial nuances and market performance. Ross Stores' ability to generate strong returns over the last decade, coupled with analysts' predictions of profitability this year, aligns with TD Cowen's optimistic outlook and reinforces the potential for long-term investment growth.
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