Financial Review: Advance Auto Parts (NYSE:AAP) vs. Ross Stores (NASDAQ:ROST)

Ross Stores (NASDAQ:ROST) and Advance Auto Parts (NYSE:AAP) are both consumer discretionary companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, valuation, risk and earnings.

Volatility & Risk

Ross Stores has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500. Comparatively, Advance Auto Parts has a beta of 1.01, meaning that its share price is 1% more volatile than the S&P 500.

Profitability

This table compares Ross Stores and Advance Auto Parts’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ross Stores	10.85%	39.29%	15.79%
Advance Auto Parts	0.97%	9.84%	1.83%

Insider & Institutional Ownership

86.9% of Ross Stores shares are owned by institutional investors. Comparatively, 88.7% of Advance Auto Parts shares are owned by institutional investors. 2.1% of Ross Stores shares are owned by insiders. Comparatively, 0.8% of Advance Auto Parts shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Ross Stores and Advance Auto Parts”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ross Stores	$22.75 billion	3.32	$2.15 billion	$8.26	28.59
Advance Auto Parts	$8.60 billion	0.29	$44.00 million	$1.37	30.35

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

Dividends

Ross Stores pays an annual dividend of $1.78 per share and has a dividend yield of 0.8%. Advance Auto Parts pays an annual dividend of $1.00 per share and has a dividend yield of 2.4%. Ross Stores pays out 21.5% of its earnings in the form of a dividend. Advance Auto Parts pays out 73.0% 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 6 consecutive years and Advance Auto Parts has raised its dividend for 1 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and target prices for Ross Stores and Advance Auto Parts, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ross Stores	0	6	15	0	2.71
Advance Auto Parts	1	17	2	0	2.05

Ross Stores currently has a consensus target price of $263.76, suggesting a potential upside of 11.71%. Advance Auto Parts has a consensus target price of $50.19, suggesting a potential upside of 20.71%. Given Advance Auto Parts’ higher probable upside, analysts plainly believe Advance Auto Parts is more favorable than Ross Stores.

Summary

Ross Stores beats Advance Auto Parts on 12 of the 17 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 Advance Auto Parts

Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts. It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives, and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades. In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance. Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing, including batteries, starters, and alternators; oil and battery recycling; and loaner tool program services. Additionally, the company sells its products through its website. It serves professional installers and do-it-yourself customers. The company operates stores under the Advance Auto Parts and Carquest names, as well as branches under the Worldpac name. The company has stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and independently owned Carquest branded stores in Mexico and various Caribbean Islands. Advance Auto Parts, Inc. was founded in 1929 and is based in Raleigh, North Carolina.