326 basis points below treasuries with record $645.9M quarterly earnings — Ross defies Graham's first principle.
Applying this framework suggests Ross stores profitability at 98th percentile heights while offering 1.07% earnings yield versus 4.33% treasuries — an arithmetic impossibility for safety-conscious investors.
Does the earnings yield compensate for equity risk versus treasury bonds?
This framework sees a deeply negative spread where treasuries offer 4x the yield with zero equity risk. The 7.7% trailing growth offers some justification, but the arithmetic remains unfavorable for conservative investors seeking bond-beating yields.
Has the company demonstrated consistent earnings over multiple years?
This framework recognizes exceptional earnings consistency with a 94.7% beat rate and record profitability. The stability through multiple cycles and maintained margins demonstrate exactly the type of proven record Graham sought.
What earnings and assets do you receive per dollar of price paid?
Applying this lens reveals premium valuations across every metric — P/E, EV/EBITDA, and FCF yield all trade in upper quintiles. At $220 versus $127 DCF value, investors pay $1.73 for each dollar of calculated worth.
Does the price protect from permanent loss of capital?
This framework finds no margin of safety — the opposite condition exists. At 73% above calculated intrinsic value with ROIC below cost of capital, the price offers vulnerability rather than protection.
Applying the Benjamin Graham framework reveals an arithmetic contradiction: Ross achieves 98th percentile profitability while offering investors a 1.07% earnings yield against 4.33% treasuries. The exceptional earnings record and proven resilience cannot overcome the absence of any margin of safety at current valuations. This framework suggests waiting for Mr. Market to offer a price that protects capital rather than endangers it. At what price would Ross offer both quality and safety?
This analysis applies Benjamin Graham's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Benjamin Graham. Educational purposes only. Not financial advice.