Analyst Note| Zain Akbari, CFA |
Narrow-moat Ross posted solid third-quarter results (including 14% comparable growth that handily beat our 8% target) that show that its value proposition is resonating, and we believe the inflationary environment will make customers more responsive to the discounts that the chain provides. Consequently (and to reflect the time value of money), we plan to raise our $106 per share valuation by a mid-single-digit percentage. However, our long-term targets should remain in place (mid-single-digit percentage annual top line growth against low-teens adjusted operating margins). While the shares traded down by a mid-single-digit percentage after the news (perhaps due to heightened expectations after other retailers' earnings announcements), we suggest investors await a more attractive entry point.