Financial Analysis: Ross Stores (ROST) & Guess? (GES)

Ross Stores (NASDAQ: ROST) and Guess? (NYSE:GES) are both retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.

Analyst Ratings

This is a breakdown of current recommendations for Ross Stores and Guess?, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ross Stores 0 9 15 0 2.63
Guess? 2 5 2 0 2.00

Ross Stores currently has a consensus target price of $69.90, indicating a potential upside of 18.43%. Guess? has a consensus target price of $12.55, indicating a potential downside of 1.99%. Given Ross Stores’ stronger consensus rating and higher probable upside, analysts clearly believe Ross Stores is more favorable than Guess?.

Profitability

This table compares Ross Stores and Guess?’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ross Stores 8.87% 43.40% 21.89%
Guess? 1.20% 3.67% 2.36%

Institutional and Insider Ownership

90.2% of Ross Stores shares are owned by institutional investors. Comparatively, 80.3% of Guess? shares are owned by institutional investors. 2.3% of Ross Stores shares are owned by company insiders. Comparatively, 29.6% of Guess? shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Ross Stores and Guess?’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ross Stores $13.08 billion 1.76 $2.13 billion $3.03 19.48
Guess? $2.22 billion 0.48 $130.81 million $0.31 41.29

Ross Stores has higher revenue and earnings than Guess?. Ross Stores is trading at a lower price-to-earnings ratio than Guess?, indicating that it is currently the more affordable of the two stocks.

Dividends

Ross Stores pays an annual dividend of $0.64 per share and has a dividend yield of 1.1%. Guess? pays an annual dividend of $0.90 per share and has a dividend yield of 7.0%. Ross Stores pays out 21.1% of its earnings in the form of a dividend. Guess? pays out 290.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ross Stores has raised its dividend for 10 consecutive years and Guess? has raised its dividend for 3 consecutive years.

Volatility and Risk

Ross Stores has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500. Comparatively, Guess? has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500.

Summary

Ross Stores beats Guess? on 14 of the 17 factors compared between the two stocks.

Ross Stores Company Profile

Ross Stores, Inc. and its subsidiaries operate two brands of off-price retail apparel and home fashion stores-Ross Dress for Less (Ross) and dd’s DISCOUNTS. The Company is the off-price apparel and home fashion chain in the United States, with 1,340 locations in 36 states, the District of Columbia and Guam, as of January 28, 2017. The Company offers in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. The Company also operated 193 dd’s DISCOUNTS stores in 15 states as of January 28, 2017. As of January 28, 2017, the Company operated a total of 1,533 stores consisted of 1,340 Ross stores and 193 dd’s DISCOUNTS stores. As of January 28, 2017, the Company owned and operated six distribution processing facilities-three in California, one in Pennsylvania, and two in South Carolina.

Guess? Company Profile

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collections of apparel and accessories for men, women and children. The Company operates through five segments: Americas Retail, Europe, Asia, Americas Wholesale and Licensing. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company’s retail, e-commerce and wholesale operations in Asia. The Asia segment includes the Company’s retail, e-commerce and wholesale operations in Asia. The Licensing segment includes the around the world licensing operations of the Company. Its apparel is marketed under various names, including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, MARCIANO, Question Mark and Triangle Design, GUESS Kids, Baby GUESS, YES, G by GUESS and GUESS by MARCIANO.

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