Should You Think About Buying Five Below, Inc. (NASDAQ:FIVE) Now?

While Five Below, Inc. (NASDAQ:FIVE) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Five Below’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Five Below

Is Five Below Still Cheap?

Five Below appears to be overvalued by 40% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$175 on the market compared to my intrinsic value of $125.14. This means that the opportunity to buy Five Below at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Five Below’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Five Below generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 96% over the next couple of years, the future seems bright for Five Below. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in FIVE’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe FIVE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on FIVE for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for FIVE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Five Below as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for Five Below (1 is concerning) you should be familiar with.

If you are no longer interested in Five Below, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.