Ross Stores, Inc.ROSTNASDAQ

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $128.29 per share(market-calibrated)

-36.0%

Upside to Fair Value

Current

$200.38

Pure Model

$122.33

Fair Value

$128.29

Bull Case

$150.29

Bear Case

$97.27

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

6.30%

Calibrated Growth

3.82%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $122.33.

What's Driving This Ratingfor ROST

✓

CapEx already efficient

CapEx at 2.93% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 10.16% — below the sector mature average of 12.24%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.7B (11.40% margin).

→

Moderate revenue growth

Analyst consensus projects 7.39% revenue growth, fading to 3.00% by Year 10. Revenue reaches $32.3B (vs $21.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $94.80/share (19.3x terminal FCF) while exit multiple gives $149.85/share (36.4x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $200.38, the market implies 6.30% perpetual growth — 330bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 54.95% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.99

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.97%

Cost of Debt

Pre-tax Cost of Debt1.34%

Tax Rate24.17%

After-tax Cost of Debt1.02%

Equity Weight (E/V)92.06%

Debt Weight (D/V)7.94%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (92.06% × 8.97%) + (7.94% × 1.02%)

= 8.34%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$22.7B	$25.1B	$27.9B	$29.6B	$32.3B
EBIT	$2.3B	$2.5B	$2.8B	$3.2B	$3.7B
Tax	$557M	$616M	$685M	$773M	$890M
NOPAT	$1.7B	$1.9B	$2.1B	$2.4B	$2.8B
+ Depreciation	$426M	$472M	$524M	$556M	$607M
- Capex	$666M	$736M	$819M	$868M	$948M
- Δ NWC	$156M	$134M	$79M	$85M	$94M
Free Cash Flow	$1.4B	$1.5B	$1.8B	$2.0B	$2.4B
Discount Factor	0.923	0.786	0.670	0.571	0.449
Present Value	$1.2B	$1.2B	$1.2B	$1.2B	$1.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.4B

Terminal Growth Rate3.00%

WACC8.34%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$45.5B

PV of Terminal Value$20.4B

Exit Multiple Method

Year 10 EBITDA$4.3B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$85.8B

PV of Terminal Value$38.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.7B

PV of Terminal Value$20.4B

Enterprise Value$32.1B

(-) Net Debt$952M

Equity Value$31.2B

Shares Outstanding329M

Price per Share$94.80

Exit Multiple Method

PV of Projected FCFs$11.7B

PV of Terminal Value$38.5B

Enterprise Value$50.2B

(-) Net Debt$952M

Equity Value$49.2B

Shares Outstanding329M

Price per Share$149.85

Pure Model Fair Value

$122.33

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
6.34%	$152.67	$158.87	$166.92	$177.82	$193.37
7.34%	$132.53	$136.21	$140.72	$146.42	$153.83
8.34%	$117.17	$119.53	$122.33	$125.70	$129.86
9.34%	$104.83	$106.43	$108.28	$110.45	$113.03
10.34%	$94.59	$95.72	$97.00	$98.48	$100.19

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$97.27

-51.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.24

Base Case

$122.33

-39.0% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.99

Bull Case

$150.29

-25.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.84

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth7.39%

Year 3 Revenue Growth5.62%

Year 5 Revenue Growth2.92%

Year 7 Revenue Growth2.95%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin10.16%

Terminal EBIT Margin12.24%

Tax Rate24.17%

Historical Capex / Rev2.93%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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