Five Below (FIVE) is Ready to Breakout

In November, a resistance level formed in the chart of Five Below Inc. (FIVE).  Now the stock is once again approaching this level and a breakout could occur soon…

Five Below Inc. (FIVE) is a value-oriented retailer with more than 900 stores. The stores cater to teen and preteen consumers and feature a wide variety of merchandise priced $5 and under. Products include discretionary items such as sporting goods, toys, electronics, beauty products, home goods, and snacks.

The company has been focusing on enhancing its merchandise assortment, improving its supply chain, and strengthening its digital capabilities. FIVE’s focus on essential goods has served it well during the pandemic. The company’s goal of expanding its store base and improving the in-store experience should draw more foot traffic.

FIVE entered last quarter with a strong balance sheet as the company’s business funds its growth and generates cash. It ended the quarter with more cash and cash equivalents than the previous quarter.

While growth over the past year was negative, both sales and earnings are expected to grow significantly next year. The stock is considered overvalued with a P/E of 88.5.

FIVE has shown recent and long-term momentum which has led to a “Strong Buy” rating in our POWR Ratings system and a grade of “A” in Trade Grade. This is reflected in the company’s stock chart.

Take a look at the 1-year chart of FIVE below with added notations…

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