Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Five Below (Nasdaq: FIVE) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and weak operating cash flow.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues rose by 22.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FIVE BELOW INC has improved earnings per share by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FIVE BELOW INC increased its bottom line by earning $0.58 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.58).
- FIVE's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that FIVE's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
- Net operating cash flow has decreased to $48.49 million or 10.56% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, FIVE BELOW INC has marginally lower results.
- FIVE has underperformed the S&P 500 Index, declining 8.55% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.