ROST — Ross Stores, Inc.

Q2 FY26 was a blowout: comps rose 10%, revenue reached $6.26B, EPS was $2.66, and FY26 EPS guidance was raised to $8.61-$8.77. Management also lifted the store-opening target to 115 and analysts responded with target hikes, including Truist to $310. The stock surged 8-9% after the release, then faded to $229.87 as of 2026-08-27, but the underlying tone remains positive.

Revenue growth has accelerated from roughly 2.6% YoY in Q1 FY25 and 4.6% in Q2 FY25 to +10.4% in Q3 FY25, +12.2% in Q4 FY25, +20.6% in Q1 FY26, and +13.3% in Q2 FY26. Reported operating margin jumped from 11.5% in Q2 FY25 to 17.6% in Q2 FY26, but that includes the $253M IEEPA tariff refund; ex-refund adjusted operating margin was about 13.6%, up roughly 205bps YoY on stronger merchandise margins and lower distribution costs. EPS followed the same inflection, from $1.47-$1.59 in early FY25 to $2.02 and $2.66 in the last two quarters. Guidance for Q3 +6-7% and Q4 +4-5% comps implies growth will moderate, so the current pace is an inflection, not the new steady-state.

Expensive versus its own history. As of 2026-08-27, ROST trades at 27.6x TTM earnings and 3.0x sales versus 5-year averages of 24.8x and 2.26x. Forward P/E is roughly 26.5x on the FY26 guidance midpoint of $8.69, or about 27x on the next-FY consensus EPS of $8.47; excluding the one-time $0.60 tariff refund, the effective multiple is roughly 28x. The PEG of 0.87 only looks cheap if the recent 30% EPS growth rate is sustainable, which the guided comp deceleration argues against.

At $229.87, the stock is pricing in continued double-digit comps and clean execution, not a miss. It sits only about 10% below its 52-week high despite the recent pullback, so much of the raised guidance is already in the price. If Q3 comps land ahead of the 6-7% guide, the premium multiple can hold or expand; if Q4 decelerates toward 4-5% as guided, the 27x multiple is vulnerable to compression. The asymmetry is more balanced than the bullish headlines suggest.

As of 2026-08-27, RSI was 39.6, price was 5.9% below the 20-day SMA and 1.9% below the 50-day SMA, but 9.2% above the 200-day SMA. That is a short-term pullback within a longer uptrend, not a breakdown. The stock is consolidating after the post-earnings spike; a hold near the 50-day, roughly $234, would be constructive, while a break below the 200-day, roughly $211, would damage the trend.

• Persistent consumer price sensitivity continues to drive trade-down traffic into off-price retail, a structural tailwind for Ross and dd's DISCOUNTS.
• Management flagged rising domestic freight and fuel costs as a margin headwind in the back half of FY26, offsetting some distribution efficiency gains.
• Tariff policy is a two-sided factor: the $253M IEEPA refund flattered Q2, and future tariff changes could create either more refunds or cost and inventory disruption.
• Higher-for-longer interest rates could pressure lower-to-middle-income shoppers' budgets, but historically that also reinforces value-seeking behavior.
• Competition for off-price inventory and customers from TJX and online discount channels remains intense; Ross's 115 new stores help share gains but add execution risk.

• Q3 FY26 earnings in mid-to-late November 2026: the 6-7% comp guide and $1.75-$1.83 EPS range will test whether traffic momentum holds against tougher comparisons.
• Continued execution of 115 store openings and the remaining buyback authorization in 2026, with $1.275B planned for the fiscal year.
• Holiday/Q4 selling season with comps guided at 4-5% and EPS of $2.17-$2.26; any upside would extend the beat-and-raise streak.
• Potential tariff-refund or trade-policy headlines that could positively or negatively affect cost of goods.

• Valuation risk: at 27.6x TTM versus the 5-year average of 24.8x, a growth slowdown could trigger multiple compression even if absolute results stay solid.
• Comparable sales deceleration from +10% to guided +4-5% in Q4 may disappoint momentum-oriented investors.
• Freight and fuel cost inflation could erode the merchandise-margin gains delivered in Q2.
• The $0.60 one-time tariff refund makes YoY EPS comparisons look better than the normalized run-rate; next year's reported growth will face a tough base.
• A consumer spending rebound or a shift toward discretionary non-value channels would reduce the trade-down tailwind.

Ross is a high-quality off-price operator with accelerating sales, expanding underlying margins, strong free cash flow, and a clean balance sheet. The problem is price: at roughly 27x forward earnings and near the top of its own historical range, the stock already embeds much of the good news. It is a great business worth owning on dips, but not a clear bargain at $229.87.

I applied a 26.0x forward P/E to next-fiscal-year consensus EPS of $8.47, a small premium to ROST's 5-year average of 24.8x to reflect higher ROIC, margin momentum, and share gains, but a discount to the current 27.6x TTM multiple because FY26 EPS includes a non-recurring $0.60 tariff refund and comps are guided to decelerate. That yields $220.25.