Ross Stores, Inc. (ROST) Executive Summary Ross Stores, Inc. is an off‑price apparel and home‑goods retailer with a cash‑generative, high‑return operating profile—trailing‑twelve‑month operating cash flow stood at $2.79B while the most recent reported ROE was 35.5% . Strengths Strengths include consistently strong cash conversion and earnings quality: operating cash flow of $2.79B exceeds trailing
Ross Stores, Inc. is an off‑price apparel and home‑goods retailer with a cash‑generative, high‑return operating profile—trailing‑twelve‑month operating cash flow stood at $2.79B while the most recent reported ROE was 35.5%.
Strengths include consistently strong cash conversion and earnings quality: operating cash flow of $2.79B exceeds trailing‑twelve‑month net income of $2.09B and operating cash flow has risen from $2.36B to $2.79B over the last year (Earnings Quality Analysis). Profitability remains robust and stable with a gross margin of 27.5%, an operating margin of 11.9% and a net margin of 9.5% in the most recent quarter (Profit Margin Trends). Leverage and liquidity are conservative, with a current ratio near 1.52, interest coverage roughly 22.9x and debt‑to‑equity about 0.26, supporting cash‑flow flexibility.
Areas of concern include slowing top‑line and per‑share momentum: revenue per share growth has decelerated to 3.7% over the last year while diluted EPS one‑year growth was -1.3%, and split‑adjusted revenue per share was $67.90 with diluted EPS at $6.43 most recently (EPS Diluted & Revenue per Share, Revenue & EPS Growth). Return on equity has also trended down from mid‑2024 peaks around 40.4% to 35.5% today, and margins have shown a modest sequential pullback (gross margin from 27.8% to 27.5%, net margin from 9.8% to 9.5%). Financing cash flow was a negative $2.33B on a TTM basis, which is material relative to operating cash generation and worth monitoring (Strategic Capital Allocation). The trailing P/E has moved to 25.1x in the most recent quarter (Price-to-Earnings (PE) Ratio Trend).
Key fundamentals to watch going forward are quarterly revenue‑per‑share and diluted EPS trends (stop‑gap: revenue‑per‑share 3.7% one‑year growth and EPS -1.3%), the gap between operating cash flow ($2.79B) and net income ($2.09B) per the earnings quality card, gross and net margin trajectories around 27.5% and 9.5% respectively, ROE direction from the current 35.5%, and the composition of financing cash flow and capital allocation decisions (Strategic Capital Allocation, Profit Margin Trends, Return on Equity (ROE)).
The foundation of business quality and long-term value creation
ROSS STORES, INC. has shown a pattern of sequential variability over the past year with revenue and net income recovering from a spring trough.
Revenue declined from $5.91B in the period ended 2025-02-01 to $4.98B in the period ended 2025-05-03, while net income declined from $586.8M to $479.2M over the same span.
The two most recent quarters then showed sequential increases: revenue rose to $5.53B (2025-08-02) and $5.60B (2025-11-01), and net income rose to $508.0M and $511.9M in those quarters.
Looking across the full series, there are notable inflection points: a significant revenue and earnings peak at $6.02B revenue and $609.7M net income in the period ended 2024-02-03, and a pronounced downturn in the period ended 2020-05-02 when revenue fell to $1.84B and net income was a loss of -$305.8M.
The most recent quarterly revenue was $5.60B. The most recent quarterly net income was $511.9M.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Nov 2024 to Nov 2025
Analyzing long-term margin stability and competitive positioning
ROSS STORES, INC. profit margins recovered sharply from a pronounced trough in early 2021—gross margin fell to 21.5%, operating margin to 1.5% and net margin to 0.7% in the 2021-01-30 quarter—then rebounded and have largely stabilized since 2021 at mid-to-high-20s gross margins and double-digit operating margins. From 2021 through 2024 margins moved into a tighter range (gross ~27–28%, operating ~11–12%, net ~8–10%), reflecting a multi-year recovery and subsequent stability. The most notable inflection point is the early-2021 collapse followed by a recovery to a new, higher-margin baseline by late 2021 and into 2022.
In the most recent quarters there has been a modest sequential pullback: gross margin edged from 27.8% () to 27.6% () to 27.5% (); operating margin moved from 12.2% to 12.0% to 11.9% over the same quarters; net profit margin declined from 9.8% to 9.6% to 9.5%. The latest observed values are: Gross Margin 27.5%, Operating Margin 11.9%, Net Profit Margin 9.5%.
Understanding Profit Margins
Between Nov 2024 and Nov 2025, Ross Stores Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
Ross Stores, Inc. has shown relatively stable trailing twelve-month net income over the past several quarters, holding around $2.06–$2.11 billion since mid-2024. Over the same recent period, operating cash flow has been higher and a bit more variable, moving from roughly $2.36–$2.51 billion through early 2025 and rising to $2.79 billion in the latest TTM reading. Across the most recent quarters, operating cash flow consistently exceeded net income by several hundred million dollars.
Looking further back in the series, operating cash flow displayed larger swings around 2020–2022 (including a trough of $337.2M in 2022-07-30 and prior peaks above $3.4B in 2021), followed by a recovery and more stable, higher cash generation through 2023–2025. The most recent trailing twelve-month operating cash flow was $2.79B and the most recent trailing twelve-month net income was $2.09B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
ROSS STORES, INC.'s trailing twelve‑month ROE has trended lower over the most recent year. After a mid‑2024 peak around 40.2–40.4% (2024-05-04 through 2024-08-03), ROE moved down to 37.9% on 2025-02-01 and continued through 37.3% (2025-05-03), 36.0% (2025-08-02) and 35.5% (2025-11-01), showing a steady quarterly decline across 2025.
Looking at the longer record, ROE at ROSS STORES, INC. has been high historically (many quarters in the 40–50% range in the 2010s), with a sharp trough to 2.6% in 2021-01-30 followed by recovery into the 30–40% band in subsequent years. The most recent Return on Equity (ROE) was 35.5%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
ROSS STORES, INC. has shown a rising operating cash flow over the last year, increasing from $2.36B (period ending 2025-02-01) to $2.47B (2025-08-02) and then to $2.79B in the most recent trailing-twelve-month period. This recent upward move in operating cash flow is the most pronounced change among the three cash-flow categories and returns the metric to levels last seen in several prior years.
Investing cash flow for ROSS STORES, INC. has been consistently negative across the series, clustering around -$700M; it moved from -$637.5M (2025-02-01) to -$708.6M (2025-05-03), -$712.8M (2025-08-02) and -$741.7M in the latest period.
Financing cash flow became more negative during 2025, shifting from -$1.86B (2025-02-01) to a trough near -$2.58B (2025-08-02) and settled at -$2.33B in the most recent trailing-twelve-months. The latest TTM values are:
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
ROSS STORES, INC.'s trailing twelve-month price-to-earnings ratio declined from 24.7x at the 2024-02-03 quarter to a low-21x range through mid-to-late 2024 (21.3–21.6x), then resumed an upward move in 2025, rising to 22.8x (2025-02-01), holding around 22.0–22.3x through the spring and summer, and accelerating to 25.1x in the most recent quarter. The most notable recent inflection was the dip into the low-21x range in 2024 followed by the steady re-rating into 2025 culminating in the latest reading.
Over the full history shown, the P/E has generally oscillated between the low-teens and mid-20s with several pronounced spikes during 2020–2021 (notably 94.7x on 2020-10-31 and 427.1x on 2021-01-30) and a historical low of 9.5x on 2010-01-31. The most recent price-to-earnings ratio observed for ROSS STORES, INC. was 25.1x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.