Analyzing Ross Stores (NASDAQ:ROST) and Dollar General (NYSE:DG)

Dollar General (NYSE:DG) and Ross Stores (NASDAQ:ROST) are both large-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, valuation, risk and analyst recommendations.

Dividends

Dollar General pays an annual dividend of $2.36 per share and has a dividend yield of 2.1%. Ross Stores pays an annual dividend of $1.62 per share and has a dividend yield of 1.2%. Dollar General pays out 45.0% of its earnings in the form of a dividend. Ross Stores pays out 25.6% 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 increased its dividend for 6 consecutive years.

Valuation and Earnings

This table compares Dollar General and Ross Stores”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Dollar General	$40.61 billion	0.60	$1.13 billion	$5.24	21.00
Ross Stores	$21.13 billion	2.01	$2.09 billion	$6.33	20.53

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

Profitability

This table compares Dollar General and Ross Stores’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Dollar General	2.81%	17.93%	4.25%
Ross Stores	9.79%	38.77%	14.16%

Insider & Institutional Ownership

91.8% of Dollar General shares are held by institutional investors. Comparatively, 86.9% of Ross Stores shares are held by institutional investors. 0.6% of Dollar General shares are held by company insiders. Comparatively, 2.2% of Ross Stores shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

Dollar General has a beta of 0.31, suggesting that its stock price is 69% less volatile than the S&P 500. Comparatively, Ross Stores has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for Dollar General and Ross Stores, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dollar General	0	16	10	1	2.44
Ross Stores	0	4	12	1	2.82

Dollar General currently has a consensus target price of $107.04, indicating a potential downside of 2.72%. Ross Stores has a consensus target price of $158.94, indicating a potential upside of 22.32%. Given Ross Stores’ stronger consensus rating and higher probable upside, analysts clearly believe Ross Stores is more favorable than Dollar General.

Summary

Ross Stores beats Dollar General on 13 of the 17 factors compared between the two stocks.

About Dollar General

Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. It offers consumable products, including paper and cleaning products, such as paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants, and laundry products; packaged food comprising cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar, and flour; and perishables that include milk, eggs, bread, refrigerated and frozen food, beer, and wine. The company's consumable products also comprise snacks, such as candies, cookies, crackers, salty snacks, and carbonated beverages; health and beauty products, including over-the-counter medicines and personal care products, such as soaps, body washes, shampoos, cosmetics, and dental hygiene and foot care products; pet supplies and pet food; and tobacco products. In addition, it offers seasonal products comprising holiday items, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, and automotive and home office supplies; and home products that include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, and bed and bath soft goods. Further, the company provides apparel, which comprise basic items for infants, toddlers, girls, boys, women, and men, as well as socks, underwear, disposable diapers, shoes, and accessories. The company was formerly known as J.L. Turner & Son, Inc. and changed its name to Dollar General Corporation in 1968. Dollar General Corporation was founded in 1939 and is based in Goodlettsville, Tennessee.

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.