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 downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, premium valuation and poor profit margins.
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- 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.
- The gross profit margin for FIVE BELOW INC is currently lower than what is desirable, coming in at 30.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.44% trails that of the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Specialty Retail industry and the overall market, FIVE BELOW INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- FIVE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.30 is very weak and demonstrates a lack of ability to pay short-term obligations.