Five Below: Valuation Improving After The Drop

Feb. 06, 2022 7:00 AM ETFive Below, Inc. (FIVE)
Taylor Dart profile picture
Taylor Dart
26.66K Followers

Summary

  • Five Below has slid more than 25% from its highs and is now underperforming the Retail Sector, after a period of meaningful outperformance since its IPO debut.
  • The recent weakness can be attributed to the volatility in the S&P-500, but is also likely due to a valuation reset, with the stock briefly priced for perfection last year.
  • However, at less than 30x FY2022 earnings estimates with impressive unit growth rates, the valuation has become much more reasonable, making Five Below a name worth keeping on one's watchlist.
  • Given the recent break of support, I am neutral short-term, but I would strongly consider starting a position on any dips below $143.00.

Five Below store in Fairfax county, Virginia shop exterior entrance with sign, logo, doors discount dollar chain for teens, pre-teens

ablokhin/iStock Editorial via Getty Images

It's been a rough start to the year for the Retail Sector (XRT), with the index down 14% to start 2022. This has taken a bite out of sector leaders like Five Below (

Five Below Store

Five Below Store (Company Website)

FIVE Hourly Chart

FIVE Hourly Chart (TC2000.com)

Five Below - Quarterly Revenue & Q4 Guidance

Five Below - Quarterly Revenue & Q4 Guidance (Company Filings, Author's Chart & Guidance)

Five Below - Annual Store Count

Five Below - Annual Store Count (Company Filings, Author's Chart & Estimates)

Five Below Earnings Trend

Five Below Earnings Trend (FactSet, Author's Chart)

FIVE Historical Earnings Multiple

FIVE Historical Earnings Multiple (FASTGraphs.com)

FIVE Daily Chart

FIVE Daily Chart (TC2000.com)

This article was written by

Taylor Dart profile picture
26.66K Followers
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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