The shares of Ross Stores, Inc. (NASDAQ:ROST) and Automatic Data Processing, Inc. (NASDAQ:ADP) were among the active stocks of the last trading sessions. Ross Stores, Inc. (NASDAQ:ROST) soared to 0.56% closing at the price of $103.33 whereas the shares of Automatic Data Processing, Inc. (NASDAQ:ADP) declined -0.28% with the decrease of -0.41 points closing at the price of $147.89. Ross Stores, Inc. has currently increase 26.1% in its stock over the period of 6-months while its rival Automatic Data Processing, Inc. added 16.14% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Ross Stores, Inc. (NASDAQ:ROST) is 42.1% while the ROI of Automatic Data Processing, Inc. (NASDAQ:ADP) is 24.4%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, ROST’s EBITDA Margin is 14.44 whereas ADP’s is 21.33.
Both the profitability ratios suggest a mixed sentiment for Ross Stores, Inc. (NASDAQ:ROST) and Automatic Data Processing, Inc. (NASDAQ:ADP).
EPS & Surprise Factor
Ross Stores, Inc. (NASDAQ:ROST) reported $1.04/share EPS for the previous quarter where analysts were predicting an EPS to be $1.01/share Thus beating the analyst Estimates with a Surprise Factor of 3 Percent. While, Automatic Data Processing, Inc. (NASDAQ:ADP) reported EPS of $1.2/share in the last quarter. The analysts projected EPS of $1.11/share depicting a Surprise of 8.1 Percent.
Taking a look at Earnings per Share, Automatic Data Processing, Inc. tends to be beating the analyst estimates more than Ross Stores, Inc.. so ADP is more profitable than ROST.
Technical Analysis of Ross Stores, Inc. & Automatic Data Processing, Inc.
Moving average convergence divergence (MACD) shows that Ross Stores, Inc. (NASDAQ:ROST) is on a PRICE RELATIVITY trend While Automatic Data Processing, Inc. (NASDAQ:ADP) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Ross Stores, Inc. was in BULLISH territory and Automatic Data Processing, Inc. was in BULLISH territory.
ROST’s current statistics gauge that the stock candle is BULLISH with HIGH volatility. While ADP’s candle is BEARISH with HIGH.
EPS Growth Rate: ROST’s 12.76% versus ADP’s 16.49%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Ross Stores, Inc. (NASDAQ:ROST) is predicted at 12.76% while Automatic Data Processing, Inc. (NASDAQ:ADP) stands at 16.49%. These numbers suggest that ADP is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of ROST stands at 1.7 while ADP is at 1 whereas the debt ratio of the prior is 0.12 while the debt ratio of the later is 0.43.
The values of the both ratios suggest that one is more liquid and other investment is more risk free.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2.2 for ROST and 2.5 for ADP which means ROST has Hold rating whereas ADP has Hold rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for ROST is $100.57 which is -2.74% of its current price while ADP has price target of 157.76 which is 6.26% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
ROST currently has price to earning P/E ratio of 25.48 whereas ADP has 37.86 while the forward P/E ratio for the prior stands at 22.7 and for the later it depicts the value of 24.72.
The price to Book P/B for ROST is 12.04, Price to Sale is at 2.58 and for ADP these ratios stand at 13.81 and 4.77.