Mr-Wallstreet Friday Stock Report Featuring Five Below (FIVE)

Who I am? @dynamicrypto sharing another old Cryptologist experience via this new account. I could not talk him into an account as he is not social media at all yet has agreed to provide a weekly report as you see here. The account creation took a bit longer than expected so apologies for the delayed report.

12/02/2018
Company name: Five Below (FIVE)
HQ: Philadelphia, PA
Current stock Price: $104.79
Dividend Yield: 0%
Z- Score: 16.4 safe zone and strong
F-Score: 7 safe and strong

Five Below Inc is a retailer which targets teen and pre-teen customers. Products includes a wide variety of discounted merchandise at prices up to $5.

I found this store by looking for a gift for someone at a valuable price. While I was in the store, I noticed that the merchandise appeared to good quality and had common brand names of sport teams and logos like Disney. I really connected with the company and came out with multiple gifts including things for me. This is why I decided to check if this company would be worth investing in.

I decided to find out if any well-known investors are into the company and to see if any insiders are buying into the company. I found Joel Greenblatt and David Einhorn are the two big investors and no insiders have bought the stock since 2015. In fact, insiders have been selling, usually not a good sign.

I also wanted to see how much competition FIVE has. Some leaders in the specialty retail are Dicks Sporting Goods (DKS), Vipshop (VIPS), and the obvious Amazon (AMZN). Other discount retailers include Dollar Tree (DLTR), Ollies Bargain Outlet (OLLI), Walmart (WMT).

This was too much competition so I decided to look for consistent long-term growth rates. This eliminated DKS, VIPS, WMT. Still too many companies so I looked at debt and this eliminated AMZN. This brought the competition down too three solid companies.

OLLI has good growth and low debt however only three year of data. Also seems to relies on store closings and refurbished goods. When I visit the store, I really don’t know what merchandise they will have it is almost like a treasure hunt.

DLTR has consistent growth and low debt. Quality seems a little lower but at a great price. You can find consistent merchandise. I usually like to go there for disposable items.

FIVE has consistent double-digit growth and has NO debt. Unlike the other two companies, you can find the treasure hunters (more organized) and bargain hunters but with brand name quality.

All three companies are worth looking into as an investment according to growth and debt.

I decided to look further into FIVE due to the zero debt factor.
FIVE has room to grow. Its currently only in 33 states and all stores are near high traffic areas.

Socially FIVE has raised over 3 million dollars for charities with missions focusing on kids. FIVE also participates in fundraising for non-profit organizations by donating 10% of participating sales to non-profit organization.

FIVE is becoming a Brand Moat. The main advantage is keeping up with trends, having fun clean stores, and pay as you go concepts to keep out of debt. FIVE can confirm its Brand as a moat by the excellent historical growth rates.

Book Value (BVPS)
7yr: 37% Current: 38%
Earning (EPS)
7yr: 46% Current: 42%
Operation Cash (OCPS)
7yr: 41% Current: 57%
Sales
7yr: 30% Current: 27%

Since the numbers continue to confirm that FIVE is a good company. Lets check out the Management. The main guy running the company is the President and CEO Joel Anderson. Joel Anderson has been with the company since 2014. Before FIVE he was Senior Vice President of Northern Plains division of Wal-mart Stores. Prior to Wal-mart he served as President of the retail and direct business units for Lenox Group and various executive positions at Toys “R” Us.
Joel Anderson first believe in people.

"I believe you have got to start with people. Everything I've done when I've moved to a new company has always been about people. Sometimes it's meant changing people or encouraging current people. In all cases, to be successful will require starting with the people. If you have the right people on the team and then passion for the customer, in that order, then the performance will come."

His goal for growth is

"When a company is growing as fast as we are, we have to stay in front of that growth and put scale in place ahead of sales. I really applied what I learned at Walmart so I could set us up for the long-term future. For example, we're going to build a distribution center a year for the next four years."

Management Return on Equity and Return on Investment Capital has been growing over 20%.

At current analyst growth rates of 30% and a future P/E of 50, I get a future price of $380.
Using free cash flow growth, I get a future price of $51.

I am currently not in the stock and looking to buy around $65 if we have a market correction.

Follow this account as we post a new report every Friday so you have the weekend to research the company for yourself also. You must do your own research as these reports are me sharing educational information only and it comes from the man who got me into the Stock Market over 20 years ago.