ROST

Ross is a genuinely high-quality business priced like a fast grower. FY2026 sales rose 7.7% to $22.8B on a healthy +5% comp (3% basket, 2% traffic), net income reached $2.15B, and the model still throws off cash: operating cash flow jumped 28.4% to $3.03B, funding $1.05B of buybacks and $528M of dividends. The balance sheet is pristine — $4.59B cash against $1.02B long-term debt (down 32.8%) and a $500M current maturity, plus 34.7% ROE. The 90-store expansion (now ~2,267 units, entering Puerto Rico and the NY Metro) and the planned ~110 openings in 2026 with a re-acceleration of dd's DISCOUNTS give a credible, low-risk runway. This is exactly the kind of durable, profitable compounder the off-price channel produces.

The problem is that the numbers underneath the headline are softening at the same time the price demands acceleration. Management's own MD&A shows operating margin slipping to 11.9% from 12.2%, net margin to 9.4% from 9.9%, with COGS (72.3% vs 72.2%) and SG&A (15.8% vs 15.5%) both ticking the wrong way. The result: diluted EPS grew only 4.6% to $6.61 and net income just 2.6% — far slower than the 7.7% top line, meaning growth is being driven by new stores and buybacks (shares -2.0%) more than by operating leverage. At $232.80 the stock trades at 35.2x those earnings and 3.3x sales; that is a ~7x PEG on mid-single-digit EPS growth — a valuation that already capitalizes years of flawless execution.