Five Below Stocks a Competitive Edge, but Shares Fail to Offer a Compelling Bargain
We’re initiating coverage of Five Below with a $66 fair value estimate and a cost-based narrow-moat rating. Our valuation, which calls for 15% average top-line growth and 12% average operating margins over the next decade, implies a forward fiscal 2018 price/earnings ratio of 29 times and an enterprise value/EBITDA ratio of 17 times. However, with shares trading in line with our valuation, we think investors should await a more favorable risk/reward opportunity.In our view, Five Below’s unit ec...
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