Five Below (FIVE) is a hot-young retailer that focuses on teenagers and their disposable income. Lots of items in Five Below are prices below five dollars, and this strategy keeps customers flocking in.
FIVE the stock has tremendous growth opportunity. The company was founded in 2002 and went public in 2012. There’s around 250 stores now (wait, 280) and management plans to grow the store count to 2000.
We really need to own FIVE because a company that grows from 200 to 2000 will probably have a stock that goes up that much too. Let’s look at my data on FIVE:
One Year Chart
FIVE popped after reporting profits last quarter, as there were indications profitability will surge in 2014. Most of Five Below’s profits come during the fourth quarter, which is 3QtrsAgo & 2QtrsOut.
What sucks is I want to buy FIVE but the P/E is 67, using 2013 estimates. The company is expected to make around a dollar next year, and sells for 48 times next year’s estimates.
Fair Value
I just ballparked a reasonable P/E of 40. When I look at this Fair Value table I think we would be lucky if FIVE fell to $38 — next year’s Fair Value — and gave us a chance to get in.
Sharek’s Take
I want to buy Five below. I need to buy it. The problem with FIVE is now the stock is too high, and we need to wait for a pullback to get in at a reasonable price. I’ll keep Five Below at the top of my radar and wait impatiently. Maybe the stock market will correct and give me a chance to get in around $40.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
