Ross Stores (ROST), $33bn, price $92.06 vs $93.70

Pitch: Leader in the off-price apparel, together with TJX. Attractive business with high-frequency repeat customers, fast inventory turnover cycle, and strong entry barriers due to the required scale for vendor relations. The current opportunity rests on (1) incremental demand from economic uncertainty forcing customers to save more, (2) record retail store closures, and (3) inelasticity of demand for small price increases, positioning ROST for pricing growth. Set to compound for a decade with 4% store base growth, 3% comps, and 4-5% capital return.

Valuation: ROST trades at 17x 2022 earnings, with abnormal freight costs and depressed pricing. Historically traded at 20xTTM PE.

Exp. gain: Three-year IRR of 17% to $150/share, with 19x multiple on $7.84 2024 EPS (vs $4.88 for 2021).

Full ROST write-up (free guest account required):

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