Ross Stores (NASDAQ: ROST) and Ascena Retail Group (NASDAQ:ASNA) are both cyclical consumer goods & services companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, valuation, institutional ownership, risk and dividends.

Insider & Institutional Ownership

91.4% of Ross Stores shares are held by institutional investors. Comparatively, 94.9% of Ascena Retail Group shares are held by institutional investors. 2.3% of Ross Stores shares are held by insiders. Comparatively, 8.0% of Ascena Retail Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

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, Ascena Retail Group has a beta of 1.96, suggesting that its share price is 96% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Ross Stores and Ascena Retail Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ross Stores 0 7 15 0 2.68
Ascena Retail Group 1 8 0 0 1.89

Ross Stores presently has a consensus target price of $75.05, suggesting a potential downside of 8.08%. Ascena Retail Group has a consensus target price of $2.75, suggesting a potential upside of 29.72%. Given Ascena Retail Group’s higher probable upside, analysts clearly believe Ascena Retail Group is more favorable than Ross Stores.

Valuation & Earnings

This table compares Ross Stores and Ascena Retail Group’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 $12.87 billion 2.43 $1.12 billion $3.13 26.09
Ascena Retail Group $6.65 billion 0.06 -$1.07 billion ($5.51) -0.38

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

Profitability

This table compares Ross Stores and Ascena Retail Group’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%
Ascena Retail Group -16.39% 2.50% 0.64%

Dividends

Ross Stores pays an annual dividend of $0.64 per share and has a dividend yield of 0.8%. Ascena Retail Group does not pay a dividend. Ross Stores pays out 20.4% of its earnings in the form of a dividend. Ross Stores has increased its dividend for 11 consecutive years.

Summary

Ross Stores beats Ascena Retail Group on 12 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.

Ascena Retail Group Company Profile

Ascena Retail Group, Inc. is a specialty retailer of apparel for women and tween girls. The Company operates through six segments: ANN, Justice, Lane Bryant, maurices, dressbarn and Catherines. The ANN segment offers feminine classics and fashion choices, sold primarily under the Ann Taylor and LOFT brands. The Justice segment offers apparel to girls who are aged 6 to 12. The Lane Bryant segment offers apparel to female customers in plus-sizes 14-28. The maurices segment offers women’s casual clothing, career wear, dressy apparel, active wear and accessories. The dressbarn segment consists of the specialty retail, outlet and e-commerce operations of the dressbarn brand. The Catherines segment offers classic apparel and accessories to female customers for wear-to-work and casual lifestyles. As of July 30, 2016, the Company operated approximately 4,900 stores in 49 United States’ states, the District of Columbia, Canada and Puerto Rico.

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