Critical Review: Ross Stores (NASDAQ:ROST) versus PriceSmart (NASDAQ:PSMT)

Ross Stores (NASDAQ:ROST) and PriceSmart (NASDAQ:PSMT) are both retail/wholesale companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Institutional and Insider Ownership

86.9% of Ross Stores shares are held by institutional investors. Comparatively, 80.5% of PriceSmart shares are held by institutional investors. 2.2% of Ross Stores shares are held by insiders. Comparatively, 17.1% of PriceSmart shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Ross Stores and PriceSmart’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%
PriceSmart	2.81%	12.40%	6.90%

Volatility & Risk

Ross Stores has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500. Comparatively, PriceSmart has a beta of 0.81, indicating that its stock price is 19% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Ross Stores and PriceSmart, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ross Stores	0	4	11	1	2.81
PriceSmart	0	0	0	0	0.00

Ross Stores currently has a consensus price target of $159.53, suggesting a potential upside of 24.51%. Given Ross Stores’ stronger consensus rating and higher probable upside, analysts plainly believe Ross Stores is more favorable than PriceSmart.

Dividends

Ross Stores pays an annual dividend of $1.62 per share and has a dividend yield of 1.3%. PriceSmart pays an annual dividend of $1.26 per share and has a dividend yield of 1.2%. Ross Stores pays out 25.6% of its earnings in the form of a dividend. PriceSmart pays out 26.9% 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 increased its dividend for 6 consecutive years and PriceSmart has increased its dividend for 4 consecutive years. Ross Stores is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Ross Stores and PriceSmart”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ross Stores	$21.13 billion	1.98	$2.09 billion	$6.33	20.24
PriceSmart	$4.91 billion	0.64	$138.88 million	$4.68	21.84

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

Summary

Ross Stores beats PriceSmart on 16 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 PriceSmart

PriceSmart, Inc. owns and operates U.S.-style membership shopping warehouse clubs in the United States, Central America, the Caribbean, and Colombia. The company provides basic and private label consumer products under the Member's Selection brand, including groceries, cleaning supplies, health and beauty aids, meat, produce, deli, seafood, and poultry. It offers electronics, large and small appliances, automotive, hardware, sporting goods, seasonal products, clothing, domestics, and home furnishing products. In addition, the company offers food and bakery services, as well as health services, such as optical, audiology, and pharmacy. Further, it operates an e-commerce platform for online ordering, curbside pickup, and delivery services. PriceSmart, Inc. was incorporated in 1994 and is headquartered in San Diego, California.