Why Five Below (FIVE) Stock Is Declining Today

NEW YORK (TheStreet) -- Five Below (FIVE) shares are down 2.9% to $41.11 on Thursday after the retailer issued third quarter guidance between 5 cents and 6 cents per diluted share. Analysts are expecting the company to earn 7 cents per diluted share.

Five Below reported second quarter earnings of 15 cents per diluted share, 1 cent better than analysts were expecting, on revenue of $152.5 million that was in line with analysts estimates.

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TheStreet Ratings team rates FIVE BELOW INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate FIVE BELOW INC (FIVE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 premium valuation and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 31.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • FIVE BELOW INC reported significant earnings per share improvement 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 ($0.90 versus $0.58).
  • 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.
  • 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.
  • You can view the full analysis from the report here: FIVE Ratings Report

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