Comparing Ross Stores (NASDAQ:ROST) & Target (NYSE:TGT)

Ross Stores (NASDAQ:ROST) and Target (NYSE:TGT) are both large-cap retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, risk, dividends and analyst recommendations.

Volatility and Risk

Ross Stores has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500. Comparatively, Target has a beta of 1.22, suggesting that its share price is 22% more volatile than the S&P 500.

Institutional and Insider Ownership

86.9% of Ross Stores shares are held by institutional investors. Comparatively, 79.7% of Target shares are held by institutional investors. 2.2% of Ross Stores shares are held by company insiders. Comparatively, 0.2% of Target shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Ross Stores and Target’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ross Stores	9.79%	38.77%	14.16%
Target	3.95%	25.59%	6.55%

Earnings and Valuation

This table compares Ross Stores and Target”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ross Stores	$21.13 billion	1.97	$2.09 billion	$6.33	20.15
Target	$105.88 billion	0.42	$4.09 billion	$9.10	10.74

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

Dividends

Ross Stores pays an annual dividend of $1.62 per share and has a dividend yield of 1.3%. Target pays an annual dividend of $4.56 per share and has a dividend yield of 4.7%. Ross Stores pays out 25.6% of its earnings in the form of a dividend. Target pays out 50.1% 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. Ross Stores has raised its dividend for 6 consecutive years and Target has raised its dividend for 54 consecutive years. Target is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current recommendations for Ross Stores and Target, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ross Stores	0	4	11	1	2.81
Target	1	24	9	0	2.24

Ross Stores presently has a consensus price target of $159.53, indicating a potential upside of 25.07%. Target has a consensus price target of $116.70, indicating a potential upside of 19.38%. Given Ross Stores’ stronger consensus rating and higher probable upside, equities research analysts clearly believe Ross Stores is more favorable than Target.

Summary

Ross Stores beats Target on 12 of the 18 factors compared between the two stocks.

About Ross Stores

Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Its stores primarily offer apparel, accessories, footwear, and home fashions. The company’s Ross Dress for Less stores sell its products at department and specialty stores to middle income households; and dd’s DISCOUNTS stores sell its products at department and discount stores for households with moderate income. Ross Stores, Inc. was incorporated in 1957 and is headquartered in Dublin, California.

About Target

Target Corporation operates as a general merchandise retailer in the United States. The company offers apparel for women, men, boys, girls, toddlers, and infants and newborns, as well as jewelry, accessories, and shoes; and beauty and personal care, baby gear, cleaning, paper products, and pet supplies. It also provides dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, and food service; electronics, which includes video game hardware and software, toys, entertainment, sporting goods, and luggage; and furniture, lighting, storage, kitchenware, small appliances, home decor, bed and bath, home improvement, school/office supplies, greeting cards and party supplies, and other seasonal merchandise. In addition, the company sells merchandise through periodic design and creative partnerships, and shop-in-shop experience; and in-store amenities. Further, it sells its products through its stores; and digital channels, including Target.com. Target Corporation was incorporated in 1902 and is headquartered in Minneapolis, Minnesota.