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Great value pick: Discount clothing retailer fits the bill

Validea's pick of the week provides a detailed report on a company that scores well in the stock-screening service's model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.

California-based discount clothing apparel and home goods retailer Ross Stores operates under the Ross Dress for Less and dd's DISCOUNTS names. It has taken in about $10-billion (U.S.)  in sales in the past year. Its market cap is $15-billion.

Ross Stores gets strong interest from the Warren Buffett-based strategy, in part because it has upped EPS in each year of the past decade. It has $840-million in annual earnings versus just $150-million in long-term debt, which the Buffett model likes.

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It has a return on capital (EBIT/tangible capital employed) of 53 per cent, part of why it gets some interest from the Joel Greenblatt-based model.

The company has $487-million in net current assets versus $150-million in long term debt, which the Benjamin Graham-based approach likes.

Ross Stores has averaged a 21-per-cent return on retained earnings over past decade, earning high marks from the Buffett model and has a 10-year avg return on equity of 33.5 per cent, which the Buffett model also likes.

It has grown EPS at a 23-per-cent clip over the long term (using avg of 3, 4, 5 yr EPS growth rates), part of why it gets strong interest from Peter Lynch model. The Lynch model also likes its 0.77 P/E-to-growth ratio.

Ross Stores  also has a 1.2-per-cent dividend.

John Reese is long ROST.

Click here for a complete breakdown of Validea's investing guru report.

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Read other research reports here.

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