Is It Too Late To Consider Five Below After Its 75% Surge in 2025?

• If you are wondering whether Five Below is still a bargain after its big run, or if you have already missed the move, this breakdown will help you assess whether the current price really matches the story.
• The stock has climbed about 5.0% over the last week, 13.7% over the past month, and 74.8% year to date, with a 53.6% gain over the last year, even though 3-year and 5-year returns have been more muted.
• Recent attention has focused on Five Below's aggressive store expansion strategy and its ongoing roll out of higher price point merchandise. Both initiatives are aimed at driving higher sales from its value-conscious customer base. At the same time, analysts have been revisiting their long-term growth assumptions in light of shifting consumer spending patterns, which has added fuel to the recent share price momentum.
• Despite all that excitement, Five Below only scores a 1 out of 6 on our valuation checks. This suggests the market may already be pricing in a lot of good news and makes it crucial to compare different valuation approaches before finishing with an even more insightful way to think about what the stock is really worth.

Five Below scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Five Below Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company is worth by projecting its future cash flows and then discounting them back to today’s dollars. In this case, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections.

Five Below generated about $176.1 Million of free cash flow over the last twelve months, and analysts, along with Simply Wall St extrapolations, see this rising to around $304.1 Million by 2035. These projections step up gradually from roughly mid $200 Millions in the late 2020s. This reflects an expectation that the business will keep expanding but at a moderating growth rate over time.

When all those future cash flows are discounted back to today using the DCF model, the estimated intrinsic value comes out at about $79.12 per share. Compared with the current Five Below share price, this implies the stock is roughly 118.9% overvalued on this methodology.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Five Below may be overvalued by 118.9%. Discover 908 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Five Below.

Approach 2: Five Below Price vs Earnings

For a profitable retailer like Five Below, the price to earnings, or PE, ratio is a useful way to gauge how much investors are willing to pay for each dollar of current earnings. In general, companies with stronger and more reliable growth prospects can justify a higher PE, while those facing greater risks or slower growth tend to trade on lower multiples.

Five Below currently trades on a PE of about 31.0x. That is above both the Specialty Retail industry average of roughly 20.0x and the peer group average of around 35.1x, suggesting investors are already paying up for its growth and expansion story. Simply Wall St also calculates a proprietary “Fair Ratio” of 19.2x for Five Below, which reflects what the PE might reasonably be, given factors such as its earnings growth profile, profit margins, industry, market cap and key risks.

This Fair Ratio is more informative than a simple comparison with peers or industry averages because it is tailored to Five Below’s specific fundamentals rather than using broad groupings. Comparing the Fair Ratio of 19.2x with the actual PE of 31.0x suggests the stock is trading at a premium to what those fundamentals would typically support.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1452 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Five Below Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page where you connect your story about Five Below, your assumptions for its future revenue, earnings and margins, and the fair value you think that story supports, then compare that Fair Value to today’s share price to decide whether it looks like a buy or a sell.

Do you think there's more to the story for Five Below? Head over to our Community to see what others are saying!

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.

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