Analyst Note| Zain Akbari, CFA |
Our $100 per share valuation of narrow-moat Ross should rise by a mid-single-digit percentage, due to the combined effects of stronger-than-expected first-quarter earnings and the time value of money. While first-quarter sales were considerably higher than we had anticipated ($4.5 billion versus our $3.8 billion), we attribute the outperformance to transitory pandemic-related effects, particularly consumers’ rising comfort with physical retail as vaccination rates rise and the impact of economic stimulus. Therefore, our long-term forecast still calls for mid-single-digit sales growth rates against low- to mid-teens adjusted operating margins long-term. We believe prospective investors should seek a more attractive entry point.