Why Wall Street Retained a ‘Buy’ Rating for Five Below



Target price changes

In the past 15 days, there has been just one price target change for Five Below (FIVE) stock. On September 24, J.P. Morgan increased its target price for Five Below to $153.00 from $150.00. The 12-month average target price for FIVE stock is $133.38, which reflects a 10.1% upside to its stock price on October 3.

Of the 18 analysts covering Five Below stock, 56.0% recommended a “buy,” and the rest of these analysts recommended a “hold.”

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New store openings, an attractive product assortment, and low-value deals are the main driving factors for Five Below’s top line. The company raised its fiscal 2018 sales guidance, driven by the strong performance in the first two reported quarters of fiscal 2018. For fiscal 2018, sales are now projected in the range of $1.53 billion–$1.54 billion, versus the earlier $1.50 billion–$1.52 billion.

Ratings for Five Below’s peers

For Big Lots (BIG), of the 12 analysts covering the stock, 58.0% have given a “buy” rating. The remaining 42.0% recommended a “hold.” Currently, Big Lots’ mean target price is $47.18, which indicates a 15.2% upside to the stock price as of October 3.

Of the 29 analysts covering Dollar General (DG) stock, 62.0% provided a “hold” rating. Another 35.0% rated it a “buy.” Currently, the analysts’ target price is $115.96, reflecting a 10.5% upside.

About 59.0% of the 27 analysts covering Dollar Tree (DLTR) stock have provided a “hold” rating, and the rest rated it a “hold.” The mean target price for Dollar Tree stock is $96.50, which indicates an 18.3% upside to its stock price.

Forward PE valuation

On October 3, Five Below was trading at a 12-month forward PE (price-to-earnings) ratio of 41.7x. Since the announcement of the second quarter of fiscal 2018[1. The second quarter ended on August 4] results on September 6, the PE valuation multiple has increased 0.9%.

Five Below is trading at a higher valuation multiple than its peers. Big Lots, Dollar Tree, and Dollar General are trading at 12-month forward PE ratios of 8.8x, 13.8x, and 16.1x, respectively.


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