GAP (GPS) vs. Ross Stores (NASDAQ:ROST) Head-To-Head Comparison

Ross Stores (NASDAQ: ROST) and GAP (NYSE:GPS) are both large-cap cyclical consumer goods & services companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, profitability, analyst recommendations, institutional ownership and valuation.

Dividends

Ross Stores pays an annual dividend of $0.64 per share and has a dividend yield of 0.8%. GAP pays an annual dividend of $0.92 per share and has a dividend yield of 2.8%. Ross Stores pays out 20.4% of its earnings in the form of a dividend. GAP pays out 42.2% 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 11 consecutive years and GAP has raised its dividend for 8 consecutive years.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Ross Stores and GAP, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ross Stores 0 7 15 0 2.68
GAP 3 20 6 0 2.10

Ross Stores currently has a consensus price target of $74.53, suggesting a potential downside of 9.73%. GAP has a consensus price target of $28.40, suggesting a potential downside of 14.42%. Given Ross Stores’ stronger consensus rating and higher possible upside, equities analysts plainly believe Ross Stores is more favorable than GAP.

Earnings & Valuation

This table compares Ross Stores and GAP’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ross Stores $12.87 billion 2.45 $1.12 billion $3.13 26.38
GAP $15.52 billion 0.83 $676.00 million $2.18 15.22

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

Insider & Institutional Ownership

91.4% of Ross Stores shares are held by institutional investors. Comparatively, 54.6% of GAP shares are held by institutional investors. 2.3% of Ross Stores shares are held by insiders. Comparatively, 27.3% of GAP shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Ross Stores has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, GAP has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.

Profitability

This table compares Ross Stores and GAP’s 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%
GAP 5.57% 27.47% 10.56%

Summary

Ross Stores beats GAP on 14 of the 17 factors compared between the two stocks.

About Ross Stores

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.

About GAP

The Gap, Inc. (Gap Inc.) is an apparel retail company. The Company offers apparel, accessories and personal care products for men, women and children under the Gap, Banana Republic, Old Navy, Athleta and Intermix brands. Its products are available to customers online through Company-owned Websites and through the use of third-parties that provide logistics and fulfillment services. In addition to operating in the specialty, outlet, online and franchise channels, it also uses the Company’s omni-channel capabilities to bridge the digital world and physical stores. Its omni-channel services, including order-in-store, reserve-in-store, find-in-store and ship-from-store are tailored across its portfolio of brands. It also sells products that are designed and manufactured by branded third-parties, especially at its Intermix brands. It has Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico.

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