Should Ross Stores Stock Be on Your Watchlist This Week?

Ross Stores (NYSE:ROST) is one of the largest discount department store retailers in the U.S., with more than more than 1,400 stores throughout the country. Moreover, Ross Stores is slated to report its quarterly earnings tomorrow, Nov. 19, after the close, with hopes of pushing its earnings per share (EPS) back to its pre-pandemic levels.

ROST currently sports a ranking of 21 on the Schaeffer's Volatility Scorecard (SVS). Using Schaeffer's extensive historical database, we conduct extensive research on each underlying equity and determined which of those underlying equities’ options have historically had underpriced or overpriced options. We rank each equity’s options relative to the others in our universe, with scores ranging from zero to 100. Lower SVS readings point to stocks that have consistently realized lower volatility than their options have priced in -- pointing to possible premium-selling candidates.

Despite the March crash that greatly impacted retail stocks, ROST has recovered fairly well since hitting its three-year low of $56.30 on --you guessed it-- March 18. The shares have doubled since then, but remain a ways off their pre-pandemic highs of $124.16 from Feb. 20. Nevertheless, the $87 level appears to have stepped up as support in recent months.

Ross Stores has beat expectations on three of its last four most recent earnings reports. In the fourth quarter of 2019, Ross Stores beat expectations by $0.06. The company reported an earnings per share (EPS) of $1.03. In the first quarter of 2020, Ross Stores reportedly increased its EPS to $1.28. The company again beat expectations, this time by a margin of $0.03. Ross Stores reported a drastic drop in EPS in the second quarter of 2020. The company missed expectations by $0.90 and reported an EPS of $0.03. In its most recent quarter, Ross Stores beat its earnings target by a whopping $0.33. The company reported a positive EPS of $0.06, in lieu of the expected -$0.27 loss. For Ross Stores' upcoming report tomorrow, the company is anticipated to report an EPS of $0.61.

The company's upcoming earnings report tomorrow will be a major deciding factor in the next direction for ROST. If Ross Stores is unable to meet earnings expectations, the equity could potentially be facing a sell-off. Overall, with ROST stock currently toting a price-earnings ratio of 72.34 and a forward price-earnings ratio of 21.79, buying ROST stock could be perceived as too expensive and too risky for a value investment approach.