If you’re looking for a retail concept that’s popular with teens and preteens, look no further than Five Below. This fast-growing company, listed on the NASDAQ as FIVE, is gaining ground across the country with its assortment of products at affordable prices. However, after the company reported its full-year financial results for 2023, investors were disappointed to see Five Below stock drop by 15%.
But for patient investors with a long-term focus, these pullbacks could present great opportunities. Five Below has a solid investment thesis – the company aims to open 2,000 new retail locations by 2030, with these locations paying for themselves in about a year. As the company’s cash flow grows, so too should its stock price.
Over the past decade, Five Below has seen substantial growth in its number of locations, overall sales, and net income. By the end of 2023, the company had over $460 million in cash and no debt, a significant improvement from its financial position in 2013.
Looking ahead to 2024 and beyond, Five Below continues its expansion strategy, maintaining a profitable business model even as it adds new locations. The company has introduced a section called “Five Beyond,” which allows it to sell merchandise at any price, mitigating concerns about sticking to items under $5 during inflationary times.
With plans to have more than 3,500 locations by 2030, Five Below could become a cash-flow machine with no debt obligations. This opens up opportunities for the company to return cash to shareholders through dividends or share repurchases. At just 3 times its trailing sales, Five Below is also reasonably priced for investors seeking growth at a reasonable price.
So, should you invest $1,000 in Five Below right now? While it’s not among the 10 best stocks identified by the Motley Fool Stock Advisor team, Five Below still presents promising growth potential. With a solid business model, growing cash flow, and expansion plans, Five Below could be a top growth stock to watch in 2024 and beyond.
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