On Tuesday, TD Cowen demonstrated continued confidence in Ross Stores (NASDAQ:ROST), Inc. shares (NASDAQ: ROST) while adjusting its financial outlook for the discount retailer. The firm has revised its price target downward to $177 from the previous $185. Despite this change, the firm maintains a Buy rating on the stock.
The adjustment in the price target reflects a new valuation based on 23 times the firm's estimated Fiscal Year 2026 earnings per share (EPS) and approximately 16 times its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA).
This recalibration comes as Ross Stores' competitor, TJX Companies Inc (NYSE:TJX)., now trades at roughly a 14% premium to Ross Stores on both forward two-year price-to-earnings (P/E) and EV/EBITDA. This is a notable shift from the five-year historical averages where TJX was at a 1% discount on P/E and was in line with Ross Stores on EV/EBITDA.
The rationale behind maintaining the Buy rating, despite the reduced price target, centers on the current purchasing environment which is deemed excellent for Ross Stores' strategic move towards offering more branded merchandise. The analyst believes that this transition aligns well with market opportunities and consumer trends.
Ross Stores, known for its off-price model, has been navigating a retail landscape that has faced numerous challenges. The company's same-store sales (SSS) have been a focal point for investors, with concerns growing over their performance. However, TD Cowen's stance suggests a belief in the company's potential to overcome these hurdles and capitalize on its strategic initiatives.
Investors and market watchers will be keeping a close eye on Ross Stores' financial performance, particularly in light of the revised price target and the firm's optimistic outlook on the company's ability to adapt to the evolving retail environment.
In other recent news, Walmart (NYSE:WMT), in collaboration with firms like Planalytics and BearingPoint, is leveraging advances in weather analytics to optimize inventory planning, advertising, and markdown timing.
Meanwhile, Ross Stores recently experienced a downgrade from Citi to a Neutral rating due to concerns over management transition and stock valuation. The company announced James Conroy as the new CEO, effective February 2025, and reported a 7% increase in total sales for the second quarter, reaching $5.3 billion.
Boot Barn (NYSE:BOOT) Holdings, where Conroy served as CEO, reported a 13.7% increase in net sales for the second fiscal quarter, reaching $425.8 million. The company also announced John Hazen as the Interim CEO following Conroy's departure. Ross Stores' leadership transition and recent financial performance have been met with positive responses from analyst firms Baird and Loop Capital, maintaining an Outperform and Buy rating respectively.
These recent developments highlight the strategic moves and financial planning of both Ross Stores and Boot Barn Holdings, as well as the increasing importance of weather analytics in the retail sector.
InvestingPro Insights
To complement TD Cowen's analysis, recent data from InvestingPro provides additional context for Ross Stores' financial position and market performance. The company's market capitalization stands at $46.88 billion, reflecting its significant presence in the Specialty Retail industry. Ross Stores' P/E ratio of 22.48 suggests a moderate valuation relative to its earnings, which aligns with TD Cowen's valuation approach.
An InvestingPro Tip highlights that Ross Stores is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.71 for the last twelve months as of Q2 2025. This metric supports TD Cowen's bullish stance on the stock, indicating potential undervaluation.
Another relevant InvestingPro Tip notes that Ross Stores has maintained dividend payments for 31 consecutive years, demonstrating financial stability and commitment to shareholder returns. This consistency in dividend payments could be attractive to investors, especially in the current retail environment.
For those interested in a deeper dive into Ross Stores' financial health and market position, InvestingPro offers 10 additional tips and a comprehensive set of financial metrics. These insights can provide valuable context for investors evaluating TD Cowen's revised price target and Buy rating.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.