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Comparing Ross Stores and Burlington Stores’ Valuation

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Valuation multiple

As of January 14, Ross Stores (ROST) and Burlington Stores (BURL) were trading at 12-month forward PE ratios of 20.2x and 23.5x, respectively.

Ross Stores beat analysts’ earnings expectations for the third quarter and increased its earnings guidance for fiscal 2018. The company’s sales were in line with the expectations. However, Ross Stores cautioned investors about a fiercely competitive retail environment and higher freight costs and wages. Ross Stores’ forward valuation multiple has declined 1.1% since the announcement of the company’s third-quarter results.

Burlington Stores reported better-than-expected sales and earnings for the third quarter and increased its top-line and earnings guidance. Burlington Stores’ valuation has risen 10.2% since the announcement of the company’s third-quarter results in November.

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Analysts’ expectations

Analysts expect Ross Stores’ adjusted EPS to increase 25.5% to $4.19 in fiscal 2018[1. Fiscal 2018 ends on February 2, 2019] due to sales growth of 5.6%. Analysts expect Ross Stores’ adjusted EPS to increase 7.6% to $4.51 with sales growth of 6.4% in fiscal 2019.

Analysts expect Burlington Stores’ adjusted EPS to increase 46% to $6.38 in fiscal 2018 with sales growth of ~10%. For fiscal 2019, Burlington Stores’ adjusted EPS is expected to rise 10.5% to $7.05. The company’s sales are expected to increase 8.5%.

The value deals offered by Ross Stores and Burlington Stores are expected to drive higher consumer traffic and boost the companies’ sales. However, intense competition in the retail market and higher costs, including freight costs and wages, are expected to put pressure on the companies’ profitability.

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