Stock (Symbol) |
Five Below (FIVE) |
Stock Price |
$41 |
Sector |
| Retail & Travel |
Data is as of |
| January 14, 2017 |
Expected to Report |
| Mar 20 – 24 |
Company Description |
 Five Below, Inc. (Five Below) is a specialty retailer offering a range of merchandise for teen and pre-teen customer. FIVE offers a range of products, all priced at five dollars and below, including select brands and licensed merchandise across a range of categories, including Style, Room, Sports, Tech, Crafts, Party, Candy and Now. FIVE operates 366 locations across 21 states. The Company’s stores have over 4,000 stock-keeping units (SKUs) across a range of categories. The Company’s product groups include leisure, fashion and home, and party and snack. Leisure includes items, such as sporting goods, games, toys, tech, books, electronic accessories, and arts and crafts. Fashion and home includes items, such as personal accessories, ‘attitude’ t-shirts, beauty offerings, home goods and storage options. Party and snack includes items, such as party and seasonal goods, greeting cards, candy and other snacks, & beverages. Source: Thomson Financial |
Sharek’s Take |
 Five Below (FIVE) is a dollar store for kids and teenagers. The company sells merchandise such as toys, games, party items, sports gear, clothes, candy & electronics for between $1 and $5 each. This is one of the last great expansion stories in the dollar chain field, as growth opportunity for Five Below is still vast. In 2015 Five Below ended the year with 437 stores, up from 366 in 2014. In 2016 the company is on pace to open 85 more locations and move into Louisiana, Wisconsin, Minnesota and Oklahoma then expand into California in 2017. Management’s goal is 2000 stores nationwide. So if the store count goes up four-fold, what will that do for the stock? Management sees sales growth of 20% a year through 2020, and analysts have an Estimated Long- Term Growth Rate of 22% per year on the stock. In my opinion, profits could compound 25% a year. At 26x earnings the stock is reasonable, but the current retail environment is tough for everyone. Five Below had flat same store sales growth last qtr, and it’s hard for a retail stock to garner any momentum unless SSS are at least 3%-5%. Although business has been stronger in the past, Five Below is a good growth story for long-term investors. Also, the strong dollar makes prices for inventory cheaper, as FIVE imports many of its items. |
One Year Chart |
 Last qtr FIVE grew profits 25% as sales increased 18%. Profits met analyst estimates. This month management gave analysts some sales numbers for the Holiday season, and these figures were just OK as the company said the election coverage hurt sales. Analysts trimmed this qtr’s estimate a bit, as well as estimates for 2016, 2017 and 2018. Profit growth Estimates for the next 4 qtrs now stand at 16%, 17%, 22% and 20%. The P/E of 26 is reasonable for 22% grower such as this. It’s hard to find 20% growers nowadays. |
Fair Value |
 During the last five qtrs Five Below’s P/E has gone from 26, 30, 39, 31 and now 26 again. I’m adjusting my Fair Value from 35x earnings to 32x due to the weak operating environment which has caused analysts to reduce estimates a bit. Still, there seems to be robust upside in the shares at these levels. |
Bottom Line |
 Five Below is one of the few good retail stocks out there as Amazon has put a hurtin on most every other bricks-and-mortar retailer. Kids and teens will continue to shop at Five Below to pick up little items just as their parents frequent dollar stores. Right now there’s a 5-10 year opportunity to increase the store could four-fold and profits could go up even more. Eventually, I think this chain will eventually sell out to one of the big dollar store chains. But for now, with same store sales flat, I don’t think the stock will have the momentum to make a big move higher. FIVE ranks 25th of 34 stocks in the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
25 of 34Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
