Opinions
Teal Linde
Five Below Inc
FIVE-Q
COMMENT
Sep 09, 2024
Stock price when the opinion was issued
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Our PAST TOP PICK with FIVE has triggered its stop at $188. To remain disciplined, we recommend covering the position at this time. When combined with our previous recommendations, this will result in a net investment gain of 31%.
Its recent results announce revenue guidance growth of 1% and earnings per share by 8%. However the stock dropped 30% along with negative sentiment towards the retail sector. It has plans to grow its store base by 15% this year which amounts to 225 stores. Its products are fairly inexpensive. Buy 17 Hold 6 Sell 0
(Analysts’ price target is $205.90)The momentum is highly negative, however, we like FIVE at an 18x to 20x forward earnings valuation range. At current levels of 22.5x forward earnings, FIVE is very close to this range and below historical levels. We are hesitant to add more here, but the stock could be bottoming and there is future value if FIVE can execute its plan.
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Sentiment toward the company is fairly poor right now and toward the discretionary sector more widely. FIVE remains a strong company fundamentally with a long runway for growth via store openings but we might give them one more quarter for a bit more clarity/visibility before adding to the name.
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It's a fast-growing company that slowed abruptly. US dollar stores got hammered last year. FIVE reacted by changing their CEO, and lowered store growth rate from 15% annually to 9%. It's still worth holding. They didn't blame the economy, but themselves.
It was a fast growing company that slowed down quickly. It has changed its CEO and is focusing on making improvements. The store count is growing less but at 9% this year. It didn't blame the economy for its problems and gave a good self-reflection with its workers.
It is in their portfolio and has been the biggest disappointment this year. Management in a conference call knows where they dropped the ball and identified issues that are fixable. There could be an industry issue too.