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UPDATE: MKM Partners Downgrades Ross Stores, Inc. (ROST) to Neutral

February 25, 2015 7:13 AM EST
Get Alerts ROST Hot Sheet
Price: $144.31 -0.56%

Rating Summary:
    27 Buy, 10 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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(Updated - February 25, 2015 11:33 AM EST)

MKM Partners downgraded Ross Stores, Inc. (NASDAQ: ROST) from Buy to Neutral with a price target of $97. Analyst Patrick McKeever noted the stock's premium valuation.

"As much as we like the fundamental story, we would have to say we think ROST should trade 21x our above-consensus 2016 EPS estimate and 12x-13x EV/EBITDA in order to get the 15% upside (or a $113 stock price) to stay with our Buy rating under MKM's rating system. Retail stock multiples have expanded recently, but this would still be well above peers and a substantial premium to ROST's historical valuation," said McKeever.

"ROST has been one of the best retail stocks to own and has gained more than 300% over the past five years (vs. SPX up just over 90%) as it has "grown into" its valuation via stronger-than-expected EPS growth (estimated 19% CAGR). ROST was also our top pick in 2014. But at this juncture, we think so much good news is priced in that risk/reward is no longer favorable. ROST trades over 20x our 2015 EPS estimate following an 8-9 month period of multiple expansion. Historically, the stock has traded 15x-16x forward EPS," he added.

For an analyst ratings summary and ratings history on Ross Stores, Inc. click here. For more ratings news on Ross Stores, Inc. click here.

Shares of Ross Stores, Inc. closed at $98.07 yesterday.



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