Contrasting Ross Stores (ROST) and Citi Trends (CTRN)

Ross Stores (NASDAQ: ROST) and Citi Trends (NASDAQ:CTRN) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, risk, earnings, institutional ownership, analyst recommendations and valuation.

Dividends

Ross Stores pays an annual dividend of $0.64 per share and has a dividend yield of 0.8%. Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.4%. Ross Stores pays out 20.4% of its earnings in the form of a dividend. Citi Trends pays out 31.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Citi Trends has increased its dividend for 11 consecutive years. Citi Trends is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings and recommmendations for Ross Stores and Citi Trends, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ross Stores 0 7 14 0 2.67
Citi Trends 0 0 0 0 N/A

Ross Stores presently has a consensus price target of $74.78, suggesting a potential downside of 3.33%. Given Ross Stores’ higher possible upside, equities analysts plainly believe Ross Stores is more favorable than Citi Trends.

Profitability

This table compares Ross Stores and Citi Trends’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ross Stores 8.93% 43.21% 21.90%
Citi Trends 2.04% 7.70% 5.14%

Institutional & Insider Ownership

91.9% of Ross Stores shares are held by institutional investors. Comparatively, 87.4% of Citi Trends shares are held by institutional investors. 2.3% of Ross Stores shares are held by company insiders. Comparatively, 4.6% of Citi Trends shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Ross Stores and Citi Trends’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ross Stores $12.87 billion 2.30 $1.12 billion $3.13 24.71
Citi Trends $695.17 million 0.45 $13.33 million $1.02 22.50

Ross Stores has higher revenue and earnings than Citi Trends. Citi Trends is trading at a lower price-to-earnings ratio than Ross Stores, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Ross Stores has a beta of 1.06, indicating that its stock price is 6% more volatile than the S&P 500. Comparatively, Citi Trends has a beta of 0.44, indicating that its stock price is 56% less volatile than the S&P 500.

Summary

Ross Stores beats Citi Trends on 13 of the 16 factors compared between the two stocks.

Ross Stores Company Profile

Ross Stores, Inc. and its subsidiaries operate two brands of off-price retail apparel and home fashion stores-Ross Dress for Less (Ross) and dd’s DISCOUNTS. The Company is the off-price apparel and home fashion chain in the United States, with 1,340 locations in 36 states, the District of Columbia and Guam, as of January 28, 2017. The Company offers in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. The Company also operated 193 dd’s DISCOUNTS stores in 15 states as of January 28, 2017. As of January 28, 2017, the Company operated a total of 1,533 stores consisted of 1,340 Ross stores and 193 dd’s DISCOUNTS stores. As of January 28, 2017, the Company owned and operated six distribution processing facilities-three in California, one in Pennsylvania, and two in South Carolina.

Citi Trends Company Profile

Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company’s segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company’s merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company’s home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

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