Five Below (FIVE:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Five Below(FIVE:NAS)

Consumer Cyclical:Specialty Retail

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Close Price/Date
$127.54 (USD) 09/24/2020

Weighted Valuation
$126.50 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 0.8%

Valuation Models Discounted Cash Flow: $111.12 (USD)
Comparables: $155.75 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Fairly valued on an Asset Valuation
According to Analyst consensus at $127.00 this stock is Fairly valued

Company Overview (FIVE:NAS USD)

Price 127.54
Range 124.85 – 130.06
52 week 52.27 – 136.68
Open 125.43
Vol / Avg. 578427/1.15M
Mkt cap 7.12B
P/E 72.06
Div/yield 0.00/0.00
EPS 3.12
Shares 55.84M
Beta 1.22

Company Description

Five Below is a value-oriented retailer that operated 900 stores in the United States as of the end of fiscal 2019. Catering to teen and preteen consumers, stores feature a wide variety of merchandise, the vast majority of which is priced at or below $6. The assortment focuses on discretionary items in several categories, particularly leisure (such as sporting goods, toys, and electronics; 50% of fiscal 2019 sales), fashion and home (for example, beauty products and accessories, home goods, and storage solutions; 31% of fiscal 2019 sales), and party and snack (including seasonal goods, candy, and beverages; 19% of fiscal 2019 sales). The chain had stores in 36 states as of the end of fiscal 2019, along with four distribution centers (with another slated to open in 2020).

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for FIVE:NAS

Using a discounted cash flow model we generated an intrinsic value of $111.12 (USD) for FIVE:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

FIVE:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $111.12 1% 5% 1% 5%
WACC (or Ke) 7.43 $139.57 $92.12
Terminal Growth Rate 2.40 $93.78 $137.07
Tax Rate 0.21 $118.50 $103.73
Cash Flow 459,161,600 $105.28 $116.95
Capital Expenditures 0 $111.12 $111.12
Long Term Debt 0 $111.12 $111.12

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $155.75 (USD) for FIVE:NAS. We also generated a valuation of $133.82 (USD) using other metrics and comparables.
The comparable companies were Bed Bath & Beyond (BBBY:NAS), Best Buy Co (BBY:NYS), Genuine Parts (GPC:NYS), RH (RH:NYS) and (FLWS:NAS).

Company FIVE:NAS End Date Value
Earnings/Share $1.77 (USD)
Book Value/Share $12.96 (USD)
Sales/Share $30.24 (USD)
Cash Flow/Share $3.60 (USD)
EBITDA/Share $4.87 (USD)
Price Based on Comps Adjustment Factor (%)
$314.72 (USD) 32.3
$182.45 (USD) 0.0
$36.94 (USD) 76.7
$30.03 (USD) 0.0
$84.76 (USD) 0.0
72.06 PE Ratio 177.81 0.00 17.04 626.27 40.79 27.13
9.84 PB Ratio 14.07 1.20 7.18 4.76 53.34 3.89
4.22 PS Ratio 1.22 0.17 0.64 0.73 3.49 1.08
35.42 PCF Ratio 13.05 16.18 4.82 8.85 23.88 11.50
44.13 EV to EBITDA 17.42 0.00 8.61 28.03 19.94 13.10


Using a multiples approach we generated a valuation of  $102.09 (USD) for FIVE:NAS

Company FIVE:NAS End Date Value
Earnings/Share $1.77 (USD)
Book Value/Share $12.96 (USD)
Sales/Share $30.24 (USD)
Cash Flow/Share $3.60 (USD)
EBITDA/Share $4.87 (USD)
Price Based on Comps Adjustment Factor
$73.36 (USD) 0
$122.57 (USD) 0
$94.53 (USD) 0
$111.10 (USD) 0
$108.88 (USD) 0
Ratios Ratio Average
PE Ratio 41.45
PB Ratio 9.45
PS Ratio 3.13
PCF Ratio 30.85
EV to EBITDA 22.37

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  FIVE:NAS for the last 10 years was  9.97

We ran the Adjusted Book Value for  FIVE:NAS and generated a book value of  $12.99 (USD)
By multiplying these we get an adjusted valuation of  $129.53 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for FIVE:NAS. The 3 analysts have a concensus valuation for FIVE:NAS for 2021 of $127.00 (USD).

FIVE:NAS Five Below

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 1 0 4.0000 Outperform 2020-9-23

Current Price: 127.54 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 2.29 3.89 4.63
# EPS Analysts 4 4 3
Mean Revenue 1,857.70 2,460.20 2,925.90
# Revenue Analysts 4 4 3
Mean Target Price 127.00
Mean Cash Flow 3.66 5.48 6.31
Mean EBITDA 206.20 378.60 448.40
Mean Net Income 103.80 218.60 260.20
Mean Debt Outstanding 831.70 916.60 864.70
Mean Tax Rate 25.00 25.00 25.10
Mean Growth Rate 21.60
Mean Capital Expenditure 177.50 214.90 160.50

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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