Ross Stores (NASDAQ: ROST) and Foot Locker (NYSE:FL) are both mid-cap retail/wholesale companies, but which is the better business? We will compare the two companies based on the strength of their risk, institutional ownership, profitability, earnings, valuation, dividends and analyst recommendations.

Volatility & Risk

Ross Stores has a beta of 1.1, suggesting that its stock price is 10% more volatile than the S&P 500. Comparatively, Foot Locker has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Ross Stores 8.87% 42.95% 21.77%
Foot Locker 7.49% 21.52% 15.50%

Institutional and Insider Ownership

90.2% of Ross Stores shares are owned by institutional investors. Comparatively, 93.5% of Foot Locker shares are owned by institutional investors. 2.3% of Ross Stores shares are owned by insiders. Comparatively, 1.7% of Foot Locker shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ross Stores 0 7 13 0 2.65
Foot Locker 1 12 11 0 2.42

Ross Stores presently has a consensus price target of $70.19, indicating a potential upside of 18.92%. Foot Locker has a consensus price target of $66.86, indicating a potential upside of 94.46%. Given Foot Locker’s higher possible upside, analysts plainly believe Foot Locker is more favorable than Ross Stores.

Valuation and Earnings

This table compares Ross Stores and Foot Locker’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ross Stores $13.33 billion 1.70 $2.19 billion $3.03 19.48
Foot Locker $7.70 billion 0.59 $1.06 billion $4.34 7.92

Ross Stores has higher revenue and earnings than Foot Locker. Foot Locker 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 $0.64 per share and has a dividend yield of 1.1%. Foot Locker pays an annual dividend of $1.24 per share and has a dividend yield of 3.6%. Ross Stores pays out 21.1% of its earnings in the form of a dividend. Foot Locker pays out 28.6% 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 10 consecutive years and Foot Locker has raised its dividend for 6 consecutive years.

Summary

Ross Stores beats Foot Locker on 13 of the 17 factors compared between the two stocks.

Ross Stores Company Profile

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.

Foot Locker Company Profile

Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates through two segments: Athletic Stores and Direct-to-Customers. The Company is an athletic footwear and apparel retailer, which include businesses, such as include Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep and SIX:02. The Direct-to-Customers segment is multi-branded and sells directly to customers through Internet and mobile sites and catalogs. The Direct-to-Customers segment operates the Websites for eastbay.com, final-score.com, eastbayteamsales.com and sp24.com. Additionally, this segment includes the Websites, both desktop and mobile, aligned with the brand names of its store banners (footlocker.com, ladyfootlocker.com, six02.com kidsfootlocker.com, champssports.com, footaction.com, footlocker.ca, footlocker.eu, runnerspoint.com and sidestep-shoes.com).

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