Ross Stores Inc. (NASDAQ:ROST)

Return on Assets (ROA)

The return on assets exhibited an increasing trend from 21.05% in 2017 to a peak of 26.14% in 2019, indicating improved efficiency in asset utilization during this period. However, this was followed by a notable decline to 17.77% in 2020, a sharp drop to 0.67% in 2021, and a partial recovery to 12.63% in 2022. The significant dip in 2021 suggests operational or external challenges impacting asset profitability in that year.

Financial Leverage

Financial leverage remained relatively stable from 2017 through 2019, declining slightly from 1.93 to 1.84. In 2020, leverage increased markedly to 2.78 and continued rising to 3.86 in 2021, before decreasing somewhat to 3.36 in 2022. This pattern suggests a strategic increase in the use of debt or other liabilities starting in 2020, possibly as a response to changing business conditions or to finance growth or restructuring activities.

Return on Equity (ROE)

The return on equity showed a consistent upward trend from 40.67% in 2017 to a high of 49.44% in 2020, reflecting strong profitability for shareholders during this period. However, similar to ROA, there was a dramatic decrease to 2.59% in 2021, followed by a significant recovery to 42.43% in 2022. The sharp decline in 2021 indicates that shareholder returns were severely impacted, which coincides with the substantial increase in financial leverage and the low ROA experienced that year.

Overall Analysis

The data reflect a period of strong financial performance from 2017 through 2019 with increasing profitability and stable leverage. The year 2020 marks a turning point, with financial leverage increasing notably and profitability measures beginning to decline. The year 2021 shows the most severe impact, with both ROA and ROE dropping sharply, accompanied by peak financial leverage, suggesting significant financial stress or operational difficulties. A partial recovery in 2022 is evident across all metrics, indicating a rebound in profitability and some easing of financial risk, though performance had not yet fully returned to the pre-2020 levels by the end of the period analyzed.

Net Profit Margin

The net profit margin demonstrated a generally positive trend from 2017 through 2019, increasing from 8.69% to 10.59%. It slightly declined in 2020 to 10.36%, followed by a significant drop to 0.68% in 2021, before rebounding to 9.11% in 2022. This pattern suggests the company's profitability experienced a sharp decline in 2021 but showed signs of recovery in the subsequent year.

Asset Turnover

Asset turnover remained relatively stable around 2.42 to 2.47 in the years 2017 to 2019. A notable decrease occurred in 2020, dropping sharply to 1.72, and further to 0.99 in 2021. In 2022, asset turnover increased to 1.39, indicating some improvement but still below earlier levels. The decline points to a reduced efficiency in using assets to generate sales during the 2020-2021 period, partially recovering in 2022.

Financial Leverage

Financial leverage showed a declining trend from 1.93 in 2017 to 1.84 in 2019, indicating a slight reduction in reliance on debt or borrowed funds. However, from 2020 onwards, leverage rose markedly, peaking at 3.86 in 2021 before decreasing to 3.36 in 2022. This suggests the company increased its use of financial leverage significantly during this period, which could have influenced its profitability and risk profile.

Return on Equity (ROE)

Return on equity followed an increasing trend from 40.67% in 2017 to a peak of 49.44% in 2020, reflecting strong profitability relative to shareholder equity. In 2021, ROE dropped precipitously to 2.59%, mirroring the net profit margin decline, before recovering to 42.43% in 2022. The sharp dip in 2021 indicates an unusual disruption impacting overall equity returns, with a return to more normal levels thereafter.

Tax Burden

The tax burden ratio exhibited an overall increasing trend from 0.63 in 2017 to a peak of 0.80 in 2021, followed by a moderate decline to 0.76 in 2022. This indicates a progressively larger proportion of pre-tax income retained after taxes over most of the period, with a slight relaxation in the latest year.

Interest Burden

The interest burden remained relatively stable around 0.99 to 1.00 from 2017 through 2020, signaling minimal interest expense impact. A significant drop to 0.55 occurred in 2021, implying a sharp increase in interest expenses or other financial costs, which was partially reversed to 0.97 in 2022.

EBIT Margin

The EBIT margin showed a general decline from 14.03% in 2017 to 12.34% in 2022, with a notable sharp fall to 1.55% in 2021. This indicates deteriorating operating profitability particularly in 2021, although it somewhat recovered in 2022.

Asset Turnover

Asset turnover decreased steadily from a high of 2.47 in 2018 and 2019 to a low of 0.99 in 2021, followed by a slight increase to 1.39 in 2022. This reflects declining efficiency in generating sales revenue from assets during the period, most markedly in 2021.

Financial Leverage

Financial leverage ratios ranged from 1.84 to 1.93 between 2017 and 2019, then increased sharply to 3.86 in 2021 and slightly reduced to 3.36 in 2022. This trend suggests a growing reliance on debt or other liabilities to finance the company’s assets, peaking around 2021.

Return on Equity (ROE)

ROE rose consistently from 40.67% in 2017 to a peak of 49.44% in 2020, indicating strong profitability for shareholders. However, it plunged dramatically to 2.59% in 2021 before rebounding to 42.43% in 2022. The sharp dip aligns with the adverse movements in EBIT margin, asset turnover, and interest burden observed in 2021.

Net Profit Margin

The net profit margin shows an overall pattern of growth from 8.69% in early 2017 to a peak of 10.59% in early 2019, indicating improving profitability during this period. However, there is a notable decline in 2021, dropping sharply to 0.68%, before recovering to 9.11% in 2022. This sudden decrease in 2021 suggests a significant drop in profitability, possibly due to extraordinary factors affecting that fiscal year.

Asset Turnover

The asset turnover ratio demonstrates a gradual decline over the years, starting from 2.42 in 2017 and decreasing to 1.39 by 2022. The ratio remained relatively stable at around 2.4 until 2019 but decreased markedly in 2020 and 2021, reaching a low of 0.99. The modest recovery in 2022 indicates some improvement in asset utilization, but the ratio remains significantly lower than in earlier years, pointing to reduced efficiency in generating sales from assets during the middle period.

Return on Assets (ROA)

ROA reflects a similar trend to the net profit margin, initially increasing from 21.05% in 2017 to a peak of 26.14% in 2019, indicative of enhanced profitability relative to asset base. Following this peak, ROA declined sharply to 0.67% in 2021, before rebounding to 12.63% in 2022. The pronounced dip in 2021 aligns with the performance issues noted in profitability and asset turnover, highlighting a year of significant operational challenges which impacted overall asset effectiveness.

Tax Burden

The tax burden ratio exhibited an overall increasing trend from 0.63 in 2017 to a peak of 0.80 in 2021, followed by a slight decline to 0.76 in 2022. This pattern indicates a generally increasing proportion of income retained after tax over the years, with a minor reversal in the most recent period.

Interest Burden

The interest burden ratio remained fairly stable around 0.99-1.00 from 2017 through 2020, suggesting minimal impact from interest expenses during these years. However, a significant decrease to 0.55 was observed in 2021, implying increased interest expenses or other extraordinary items affecting earnings before interest and taxes. The ratio rebounded to 0.97 in 2022, nearly restoring the previous stable level.

EBIT Margin

The EBIT margin showed a marginal decline from 14.03% in 2017 to approximately 13.5% in 2020, indicating slight pressure on operating profitability. There was a drastic drop to 1.55% in 2021, followed by some recovery to 12.34% in 2022. The dip in 2021 suggests significant operational challenges or one-time losses affecting earnings before interest and taxes that year.

Asset Turnover

Asset turnover remained steady around 2.42-2.47 from 2017 to 2019, reflecting stable efficiency in generating sales from assets. However, it sharply declined to 1.72 in 2020 and further dropped to 0.99 in 2021, indicating deteriorating asset utilization. There was a modest recovery to 1.39 in 2022, though still well below earlier levels.

Return on Assets (ROA)

ROA increased from 21.05% in 2017 to a high of 26.14% in 2019, reflecting strong overall profitability relative to assets during this period. This performance deteriorated significantly to 17.77% in 2020 and plummeted to 0.67% in 2021, indicating substantial challenges impacting asset returns. A partial rebound to 12.63% was seen in 2022, but profitability remained substantially below peak levels.

The financial data reveals several noteworthy trends across the six-year period.

Tax Burden

The tax burden ratio demonstrates an overall increase from 0.63 in 2017 to a peak of 0.80 in 2021, followed by a slight decrease to 0.76 in 2022. This pattern indicates a rising portion of earnings attributable to taxes over the years, with a marginal retreat in the most recent year.

Interest Burden

The interest burden remained quite stable near 0.99 to 1.0 from 2017 through 2020, suggesting minimal impact from interest expenses during this timeframe. However, a notable drop to 0.55 in 2021 occurred, signaling a substantial reduction in earnings due to interest or an accounting anomaly, before rebounding back to 0.97 in 2022, close to historical levels.

EBIT Margin

EBIT margin displayed a relatively stable and healthy range from 14.03% to 14.57% between 2017 and 2018, slightly declining to around 13.5% from 2019 to 2020. A sharp and significant decline to 1.55% in 2021 represents a major drop in operating profitability, partially recovering to 12.34% in 2022 but still below early period margins.

Net Profit Margin

Net profit margin exhibited a consistent upward trend from 8.69% in 2017 to a high of 10.59% in 2019, followed by a marginal decrease to 10.36% in 2020. In 2021, there was an abrupt plummet to 0.68%, implying significant profitability challenges during that year. By 2022, the margin improved notably to 9.11% but did not fully return to the levels seen before 2021.

Overall, the data suggests that the company maintained relatively stable profitability and controlled tax and interest impacts up until 2020. The year 2021 marked a period of exceptional financial strain, evidenced by sudden declines in margins and fluctuations in interest burden. The following year, 2022, showed signs of recovery but still left profitability metrics below the earlier baseline. This pattern indicates potential operational or external challenges during 2021, with partial recovery thereafter.