ONE LEVEL DEEPER
ROST
Warren Buffett frameworkThe Owner-OperatorBenjamin Graham frameworkThe Value ArchitectMichael Mauboussin frameworkThe Expectations EngineerHoward Marks frameworkThe Cycle WhispererPeter Lynch frameworkThe Everyday Edge

With 27% earnings growth and PEG below 1.0, Ross looks cheap — until you see 89.7% institutional ownership.

cautiousLeaning Bullishconviction

Ross Stores hits record earnings as a fast grower, but the PEG ratio above 3 and institutional saturation suggest the easy money has been made.

THE LENSES
THE CLASSIFICATIONexceptional

What type of company is Ross — and what should we expect?

TTM revenue growth of 7.7% with EPS growth of 27.0% in Q1'26
Net income hit record $645.9M in Q1'26, 98th percentile over 10 years
Operating margins stable at 12.3% in Q1'26 versus 12.4% prior year
Revenue mix diversified across six categories, no segment over 26%

This framework classifies Ross as a fast grower — revenue growing modestly but earnings surging 27%, the hallmark of operational leverage. The stability in margins and diversified revenue base suggest this isn't a flash in the pan but sustained execution.

Earnings Per Share
THE PEG RATIOmixed

Is Ross fairly priced for the growth it delivers?

P/E ratio of 23.35 with EPS growth of 27.0% yields PEG of 0.86
Stock at $219.98 versus analyst consensus target of $205.69
Earnings beat rate of 94.7% over 38 quarters
Market implies 4.54% perpetual growth versus 7.7% trailing

Applying this lens reveals a PEG below 1.0, which Lynch would find interesting — paying less than the growth rate. However, the 27% EPS growth appears unsustainable given revenue growing at 7.7%, suggesting the PEG will deteriorate as earnings growth normalizes.

P/E Ratio
THE GROWTH STORYmagnificent

Can you explain Ross's growth in one sentence?

Off-price retail model selling brand names at 20-70% discount
Revenue strongly correlated with inflation (0.853), suggesting pricing power
Home segment leads at 26% of revenue, followed by Ladies at 22%
Cash conversion cycle of just 7.07 days in Q1'26

The growth story is crystal clear: Ross buys excess inventory from brands and sells it cheap, thriving when consumers seek value. The inflation correlation shows they raise prices successfully, and the 7-day cash cycle means they sell merchandise before paying for it.

Revenue by Segment
THE INSTITUTIONAL FOOTPRINTsaturated

Is Ross overowned by the big money?

Institutional ownership at 89.7% in Q4'25, up from 88.7%
149 net new institutional positions opened in Q4'25
Top 5 institutions control 29.84% of shares
Analyst targets range narrowly from $195-221, suggesting consensus

This framework sees danger — nearly 90% institutional ownership leaves little room for new buyers. When everyone already owns it, who pushes the price higher? The narrow analyst target range suggests the Street has found everything worth finding.

Price Targets
195
low
221
high
202.5
median
204.7
consensus
KEY NUMBERS
VERDICT

Applying the Lynch framework reveals a classic late-innings fast grower: Ross executes brilliantly with record earnings and a simple business model, but 90% institutional ownership and a normalizing PEG ratio suggest the big gains are behind us. The framework appreciates the operational excellence but questions whether there's enough growth runway left to justify current prices. Is this still a growth stock, or has it become an expensive stalwart?

This analysis applies Peter Lynch's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Peter Lynch. Educational purposes only. Not financial advice.

OTHER PERSPECTIVES
Warren Buffett framework
The Owner-Operator
Leaning Bullish
Benjamin Graham framework
The Value Architect
Leaning Bearish
Michael Mauboussin framework
The Expectations Engineer
Leaning Bearish
Howard Marks framework
The Cycle Whisperer
Bearish
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EDUCATIONAL ONLY · NOT FINANCIAL ADVICEv2