Is it safe to buy Five Below stock as shares pull back to trim post-earnings gains?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Dec 3, 2021
  • Five Below shares on Friday pulled back more than 2.5%.
  • The stock had spiked more than 8% on Thursday.
  • The company reported better-than-expected FQ3 results on Wednesday after markets closed.

On Friday, Five Below Inc. (NASDAQ:FIVE) shares edged lower by more than 2.5%, trimming Thursday’s gains. The stock has spiked more than 8% following a solid FQ3 performance. Five Below announced its most recent quarterly results Wednesday after markets closed, beating the consensus analyst expectations on revenue and earnings.

The company posted FQ3 GAAP earnings per share of $0.43, beating the average for analyst expectations of $0.29. On the other hand, revenue for the quarter surged more than 27% from the same quarter in 2020 to $607.64 million, surpassing the average for analyst estimates by $43.48 million.

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The company now expects FQ4 revenue in the range of $985 million to $1,005 million, while diluted net income per share is forecasted to be in the range of $2.36-$2.48. 

Is Five Below a growth stock?

From an investment perspective, Five Below shares trade at steep trailing 12-month and forward P/E ratios of 43.18 and 35.35, respectively. Therefore, bargain hunters could opt for alternatives in the market.

On the other hand, analysts expect its earnings per share to increase at an average annual rate of 42.84 over the next five years compared to an average annual increase of 15.90% in the previous five.

Therefore, the stock could be an exciting option for long-term growth investors.

Source – TradingView

Technically, Five Below seems to be trading within a descending channel formation in the intraday chart. As a result, it has plunged closer to the oversold conditions of the 14-day RSI.

Therefore, investors could target potential rebound profits at around $200.72, or higher at $209.59. On the other hand, $187.81 and $179.20 are crucial support zones.

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