This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Five Below Falling Toward Earth

NEW YORK (TheStreet) -- It's a rare that I get interested in a growth stock.

Call it a shortcoming or perhaps an investment philosophy character flaw, but I'm just not wired to be a growth investor. During the tech boom, I was buying boring and cheap companies, while many of my colleagues were into the latest highflyers. They were making money, too; at least while it lasted. But the bottom line is that I'm just a value guy at heart, and that is unlikely to change.

Occasionally, however, I'll take a position in a former growth company that has gone to the "dark side," as growth investors begin to give up and formerly high multiples become more compelling. It happened with eBay (EBAY) a few years ago and more recently with Corning (GLW), which I still own.

One company that is starting to look interesting is retailer Five Below (FIVE). Now, this is no eBay or Corning, for sure. Somewhat new to the scene having gone public in July 2012, it's not exactly cheap.

But for a company with a great retail concept that is also in its infancy, it appears as though the growth crowd has turned on it, at least for now. Shares are down 36% since mid-November, with much of that damage done due to lowered company outlook for its fiscal fourth quarter.

Five Below opened 28 new stores during its fiscal third quarter and 60 during the first nine months of 2013. The company ended its third quarter with 304 stores in 19 states. When it went public less than two years ago, it had about 200 stores, and was not profitable.

It had big plans -- to open up to 2,000 stores over 20 years. That may actually be doable.

Now profitable, Five Below trades for about 39 times 2015 estimates. That's a number that would often make me choke, but in this case, it is making me intrigued.

I would take a position in a heartbeat at 30 times the 2015 average estimate of analysts, which would imply a $27 stock price, but I don't know if we'll get there; that would take another 23% drop from current levels.

 FIVE ChartFIVE data by YCharts

Stock quotes in this article: FIVE, EBAY, GLW 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,423.31 +160.75 0.99%
S&P 500 1,860.34 +17.36 0.94%
NASDAQ 4,082.2890 +48.1280 1.19%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs