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How Five Below’s Valuation Numbers Stack Up

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Forward PE

As of June 7, Five Below (FIVE) was trading at a 12-month forward PE multiple of 27.7x. A forward PE multiple is one of the most used ratios for making investment decisions by comparing companies in the same industry. Forward PE is calculated by dividing a stock price by analysts’ earnings estimates for the upcoming four quarters.

Five Below is trading at a higher PE than its peers. Big Lots (BIG), Dollar Tree (DLTR), and Dollar General (DG) are trading at 12-month forward PE ratios of 9.1x, 14.1x, and 15%, respectively.

Five Below is on a store footprint expansion spree. It’s also investing in increasing brand awareness. Its focus on preteens and teens and its competitive pricing have paid off. Its tax reform benefits are also likely to help its bottom line in fiscal 2018.

For fiscal 2018, the company estimates sales of $1.502 billion–$1.517 billion. Analysts project that Five Below’s fiscal 2018 revenues will rise 18.8% to $1.52 billion.

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Analysts’ sales projection for FIVE’s peers

For fiscal 2018, analysts expect revenue for Big Lots to fall 0.8% to $5.2 billion. Analysts estimate that Dollar General will report revenue growth of 8.3% to $25.4 billion. Dollar Tree’s revenues are expected to rise 3.5% to $23.1 billion.

Most analysts are bullish on Dollar General as the company continues to focus on opening new stores. Dollar General plans to open 900 stores in fiscal 2018. It’s also enhancing its digital sales channel. The company’s focus on increasing a higher-margin, non-consumable assortment is also likely to boost sales.

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