Walmart (WMT +1.31%) is a solid stock to invest in, as its business is diverse and robust. The company is able to generate steady growth, regardless of economic conditions, as its big-box stores offer something for everyone. In the past five years, shares of Walmart have risen by around 190%.
However, amid those impressive gains, its stock has reached elevated levels. Buying a stock that trades at a high premium comes with risk, regardless of how good the business may appear to be. And so while Walmart may be a quality long-term stock to own, there's one stock that may be an even better buy right now, and that's Ross Stores (ROST 1.38%).
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Ross Stores delivers strong growth in Q4
Retail company Ross Stores released its fourth-quarter numbers last week, which exceeded its guidance. The business had a terrific quarter for the holiday season with sales for the three-month period ending Jan. 31 totaling $6.6 billion, rising by 12% year over year. The company's comparable store sales rose by 9%. The comparable number is key as it only factors in stores that were open a year ago, and thus, excludes the effect of stores being closed and opened within that time frame.
It was a terrific performance for the company that enabled it to generate a per-share profit of $2.00, which was well above its guidance range of $1.77 to $1.85. Ross Stores says it is seeing a "strong start" for the current quarter and projects its comparable store sales to be up between 7% and 8%. It is a bit more modest in its full-year growth, however, projecting just 3% to 4% same-store growth over the 12-month period.
NASDAQ: ROST
Key Data Points
Why Ross Stores looks like an underrated buy today
Ross Stores' stock spiked on the strong earnings numbers, and it's now up around 18% for the year. It's currently trading at 33 times its trailing earnings, which may be a bit high, but that's well below the 45 times earnings that Walmart trades at.
While Walmart offers a more diversified shopping option, Ross can appeal to shoppers who are looking for a budget-friendly bargain-hunting experience. And at a time when economic conditions are proving to be challenging, Ross Stores could be in a great position to do better than other retailers, as consumers are clearly seeing a lot of value in its stores these days.
If you're a long-term investor, it's hard to go wrong with Walmart or Ross Stores, as both have great underlying businesses. But with a more attractive valuation and potentially greater growth potential ahead, Ross Stores may be the better of the two retail stocks to buy today.
