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Five Below: Discount Retailer's Shares Are Pricey

I'll no doubt get some arguments on this one. After all, Five Below is in growth mode, and the company says it can grow to more than 2,000 over 20 years, vs. the current 200.

The company opened 50 new stores in 2011, and plans to open a total of this year and 60 in 2013. That's some pretty rapid growth and very ambitious. Those high expectations are reflected in the current stock price.

Here's the analogy: You walk into a store and see a great piece of merchandise. It's just what you want. The only problem is that it's priced much higher than its value. You pass on that item, not because it wasn't exactly what you wanted, but simply because the price was too high.

I believe that the price of Five Below is simply too high at this point. But you must also consider the source. I'm a value investor and like to buy on the cheap.

I hope to get that opportunity with Five Below.

We'll get our first opportunity to see the company's progress as a publicly traded company when it reports second-quarter results on Monday, Sept. 10.

At the time of publication, Heller had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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