Five Below (FIVE) Showing Signs Of Being Water-Logged And Getting Wetter

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.

Trade-Ideas LLC identified Five Below ( FIVE) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Five Below as such a stock due to the following factors:

  • FIVE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.5 million.
  • FIVE has traded 841,662 shares today.
  • FIVE traded in a range 240% of the normal price range with a price range of $3.03.
  • FIVE traded below its daily resistance level (quality: 119 days, meaning that the stock is crossing a resistance level set by the last 119 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on FIVE:

Five Below, Inc. operates as a specialty value retailer in the United States. The company offers various products priced at $5 and below. FIVE has a PE ratio of 61.3. Currently there are 7 analysts that rate Five Below a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Five Below has been 993,000 shares per day over the past 30 days. Five Below has a market cap of $2.0 billion and is part of the services sector and specialty retail industry. The stock has a beta of 13113.10 and a short float of 16.9% with 9.04 days to cover. Shares are down 15.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Five Below as a 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.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.6%. 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 ($0.89 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.
  • In its most recent trading session, FIVE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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