ROST - Valens Credit Report - 2023 10 24
Credit markets are slightly overstating ROST's credit risk with a YTW of 5.922% relative to an Intrinsic YTW of 5.199% and an Intrinsic CDS of 48bps. Meanwhile, Moody's is overstating the company's fundamental credit risk, with its investment-grade A2 credit rating two notches higher than Valens' IG4+ (Baa1) credit rating.That said, Incentive Dictate Behavior™ analysis highlights mostly negative signals for creditors. As a positive, all management members are material owners of ROST equity relative to their annual compensation indicating they may be aligned with shareholders to pursue long-term value creation for the company.
Earnings Call Forensics™ analysis of the firm's Q2 2024 (08/17/2023) highlights that management is confident they are seeing broad-based availability in inventory and that they can carefully manage their inventory to maximize potential for sales and earnings growth.
Ross Stores and its subsidiaries operate two brands of off-price retail apparel and home fashion stores, which are Ross Dress for Less? (Ross) and dd's DISCOUNTS?. Ross provides 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. dd's DISCOUNTS provides name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day. Both of the company's Ross and dd's DISCOUNTS brands target women and men between the ages of 18 and 54.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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