Stock Analysis

What Does Five Below, Inc.'s (NASDAQ:FIVE) Share Price Indicate?

  •  Updated
NasdaqGS:FIVE
Source: Shutterstock

Five Below, Inc. (NASDAQ:FIVE), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$219 and falling to the lows of US$154. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Five Below's current trading price of US$162 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Five Below’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Five Below

What is Five Below worth?

According to my valuation model, Five Below seems to be fairly priced at around 0.54% above my intrinsic value, which means if you buy Five Below today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $161.48, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Five Below’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Five Below?

earnings-and-revenue-growth
NasdaqGS:FIVE Earnings and Revenue Growth February 18th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Five Below's earnings over the next few years are expected to increase by 72%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in FIVE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on FIVE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Five Below at this point in time. To help with this, we've discovered 2 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Five Below.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Five Below is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis