Intrinsic value of Five Below, Inc. - FIVE

Previous Close

$116.97

  Intrinsic Value

$85.73

stock screener

  Rating & Target

sell

-27%

Previous close

$116.97

 
Intrinsic value

$85.73

 
Up/down potential

-27%

 
Rating

sell

We calculate the intrinsic value of FIVE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 6.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  21.60
  19.94
  18.45
  17.10
  15.89
  14.80
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
Revenue, $m
  1,554
  1,864
  2,208
  2,585
  2,996
  3,440
  3,915
  4,422
  4,959
  5,526
  6,122
  6,747
  7,400
  8,082
  8,794
  9,534
  10,304
  11,104
  11,936
  12,800
  13,699
  14,633
  15,603
  16,613
  17,664
  18,758
  19,897
  21,083
  22,321
  23,611
Variable operating expenses, $m
  1,308
  1,565
  1,850
  2,164
  2,505
  2,873
  3,267
  3,688
  4,133
  4,604
  5,080
  5,599
  6,142
  6,708
  7,298
  7,912
  8,551
  9,216
  9,906
  10,623
  11,369
  12,144
  12,950
  13,788
  14,659
  15,567
  16,512
  17,498
  18,524
  19,595
Fixed operating expenses, $m
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  59
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
Total operating expenses, $m
  1,351
  1,609
  1,895
  2,210
  2,552
  2,921
  3,316
  3,738
  4,184
  4,656
  5,133
  5,654
  6,198
  6,765
  7,356
  7,971
  8,612
  9,278
  9,970
  10,688
  11,435
  12,212
  13,019
  13,859
  14,731
  15,641
  16,588
  17,575
  18,603
  19,676
Operating income, $m
  203
  255
  313
  376
  445
  519
  599
  684
  774
  870
  988
  1,093
  1,203
  1,318
  1,437
  1,562
  1,692
  1,827
  1,967
  2,112
  2,264
  2,421
  2,585
  2,755
  2,932
  3,116
  3,309
  3,509
  3,717
  3,935
EBITDA, $m
  260
  320
  386
  459
  538
  623
  715
  813
  916
  1,026
  1,141
  1,262
  1,388
  1,520
  1,657
  1,800
  1,949
  2,104
  2,265
  2,432
  2,606
  2,787
  2,975
  3,170
  3,374
  3,585
  3,806
  4,036
  4,275
  4,526
Interest expense (income), $m
  0
  0
  3
  6
  9
  13
  17
  22
  26
  31
  37
  43
  48
  55
  61
  68
  75
  83
  90
  98
  107
  115
  124
  134
  143
  154
  164
  175
  186
  198
  211
Earnings before tax, $m
  203
  252
  307
  367
  432
  502
  577
  658
  743
  833
  945
  1,044
  1,148
  1,256
  1,369
  1,487
  1,609
  1,736
  1,868
  2,006
  2,148
  2,297
  2,451
  2,611
  2,778
  2,952
  3,133
  3,322
  3,519
  3,725
Tax expense, $m
  55
  68
  83
  99
  117
  136
  156
  178
  201
  225
  255
  282
  310
  339
  370
  401
  434
  469
  504
  541
  580
  620
  662
  705
  750
  797
  846
  897
  950
  1,006
Net income, $m
  148
  184
  224
  268
  315
  366
  421
  480
  542
  608
  690
  762
  838
  917
  1,000
  1,085
  1,175
  1,267
  1,364
  1,464
  1,568
  1,677
  1,789
  1,906
  2,028
  2,155
  2,287
  2,425
  2,569
  2,719

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  749
  898
  1,063
  1,245
  1,443
  1,657
  1,886
  2,130
  2,389
  2,662
  2,949
  3,250
  3,565
  3,893
  4,236
  4,592
  4,963
  5,349
  5,750
  6,166
  6,599
  7,048
  7,516
  8,003
  8,509
  9,035
  9,584
  10,156
  10,752
  11,373
Adjusted assets (=assets-cash), $m
  749
  898
  1,063
  1,245
  1,443
  1,657
  1,886
  2,130
  2,389
  2,662
  2,949
  3,250
  3,565
  3,893
  4,236
  4,592
  4,963
  5,349
  5,750
  6,166
  6,599
  7,048
  7,516
  8,003
  8,509
  9,035
  9,584
  10,156
  10,752
  11,373
Revenue / Adjusted assets
  2.075
  2.076
  2.077
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
  2.076
Average production assets, $m
  194
  233
  276
  323
  375
  430
  489
  553
  620
  691
  765
  843
  925
  1,010
  1,099
  1,192
  1,288
  1,388
  1,492
  1,600
  1,712
  1,829
  1,950
  2,077
  2,208
  2,345
  2,487
  2,635
  2,790
  2,951
Working capital, $m
  85
  103
  121
  142
  165
  189
  215
  243
  273
  304
  337
  371
  407
  445
  484
  524
  567
  611
  656
  704
  753
  805
  858
  914
  972
  1,032
  1,094
  1,160
  1,228
  1,299
Total debt, $m
  51
  109
  172
  242
  318
  401
  489
  583
  682
  788
  898
  1,014
  1,135
  1,262
  1,394
  1,531
  1,674
  1,822
  1,976
  2,137
  2,303
  2,477
  2,657
  2,844
  3,039
  3,241
  3,453
  3,673
  3,902
  4,142
Total liabilities, $m
  288
  346
  409
  479
  556
  638
  726
  820
  920
  1,025
  1,135
  1,251
  1,372
  1,499
  1,631
  1,768
  1,911
  2,059
  2,214
  2,374
  2,540
  2,714
  2,894
  3,081
  3,276
  3,479
  3,690
  3,910
  4,139
  4,379
Total equity, $m
  460
  552
  654
  766
  888
  1,019
  1,160
  1,310
  1,469
  1,637
  1,813
  1,999
  2,192
  2,394
  2,605
  2,824
  3,052
  3,290
  3,536
  3,792
  4,058
  4,335
  4,622
  4,922
  5,233
  5,557
  5,894
  6,246
  6,612
  6,995
Total liabilities and equity, $m
  748
  898
  1,063
  1,245
  1,444
  1,657
  1,886
  2,130
  2,389
  2,662
  2,948
  3,250
  3,564
  3,893
  4,236
  4,592
  4,963
  5,349
  5,750
  6,166
  6,598
  7,049
  7,516
  8,003
  8,509
  9,036
  9,584
  10,156
  10,751
  11,374
Debt-to-equity ratio
  0.110
  0.200
  0.260
  0.320
  0.360
  0.390
  0.420
  0.440
  0.460
  0.480
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
Adjusted equity ratio
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  148
  184
  224
  268
  315
  366
  421
  480
  542
  608
  690
  762
  838
  917
  1,000
  1,085
  1,175
  1,267
  1,364
  1,464
  1,568
  1,677
  1,789
  1,906
  2,028
  2,155
  2,287
  2,425
  2,569
  2,719
Depreciation, amort., depletion, $m
  57
  65
  73
  83
  93
  104
  116
  129
  142
  156
  153
  169
  185
  202
  220
  238
  258
  278
  298
  320
  342
  366
  390
  415
  442
  469
  497
  527
  558
  590
Funds from operations, $m
  205
  249
  297
  350
  408
  470
  537
  609
  684
  764
  843
  931
  1,023
  1,119
  1,219
  1,324
  1,432
  1,545
  1,662
  1,784
  1,911
  2,042
  2,179
  2,322
  2,470
  2,624
  2,785
  2,952
  3,127
  3,309
Change in working capital, $m
  15
  17
  19
  21
  23
  24
  26
  28
  30
  31
  33
  34
  36
  38
  39
  41
  42
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  65
  68
  71
Cash from operations, $m
  190
  232
  278
  329
  385
  446
  511
  581
  655
  733
  810
  897
  987
  1,082
  1,180
  1,283
  1,390
  1,501
  1,616
  1,737
  1,861
  1,991
  2,126
  2,266
  2,412
  2,564
  2,722
  2,887
  3,059
  3,238
Maintenance CAPEX, $m
  -32
  -39
  -47
  -55
  -65
  -75
  -86
  -98
  -111
  -124
  -138
  -153
  -169
  -185
  -202
  -220
  -238
  -258
  -278
  -298
  -320
  -342
  -366
  -390
  -415
  -442
  -469
  -497
  -527
  -558
New CAPEX, $m
  -35
  -39
  -43
  -47
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -78
  -82
  -85
  -89
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -121
  -126
  -131
  -137
  -142
  -148
  -155
  -161
Cash from investing activities, $m
  -67
  -78
  -90
  -102
  -116
  -130
  -145
  -161
  -178
  -195
  -213
  -231
  -251
  -270
  -291
  -313
  -334
  -358
  -382
  -406
  -432
  -459
  -487
  -516
  -546
  -579
  -611
  -645
  -682
  -719
Free cash flow, $m
  123
  154
  189
  227
  269
  316
  366
  420
  477
  538
  598
  666
  737
  811
  889
  971
  1,055
  1,143
  1,235
  1,330
  1,429
  1,532
  1,639
  1,750
  1,865
  1,986
  2,111
  2,241
  2,377
  2,519
Issuance/(repayment) of debt, $m
  51
  57
  64
  70
  76
  82
  88
  94
  100
  105
  111
  116
  121
  127
  132
  137
  143
  148
  154
  160
  167
  173
  180
  187
  195
  203
  211
  220
  229
  239
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  51
  57
  64
  70
  76
  82
  88
  94
  100
  105
  111
  116
  121
  127
  132
  137
  143
  148
  154
  160
  167
  173
  180
  187
  195
  203
  211
  220
  229
  239
Total cash flow (excl. dividends), $m
  175
  212
  252
  297
  346
  398
  454
  514
  577
  643
  708
  781
  858
  938
  1,021
  1,108
  1,198
  1,292
  1,389
  1,490
  1,596
  1,705
  1,819
  1,937
  2,060
  2,189
  2,322
  2,461
  2,607
  2,758
Retained Cash Flow (-), $m
  -82
  -92
  -102
  -112
  -122
  -131
  -141
  -150
  -159
  -168
  -177
  -185
  -194
  -202
  -211
  -219
  -228
  -237
  -246
  -256
  -266
  -277
  -288
  -299
  -311
  -324
  -337
  -352
  -367
  -382
Prev. year cash balance distribution, $m
  80
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  173
  120
  151
  185
  224
  267
  313
  363
  418
  475
  532
  596
  664
  736
  811
  889
  970
  1,055
  1,143
  1,234
  1,329
  1,428
  1,531
  1,638
  1,749
  1,865
  1,985
  2,110
  2,240
  2,376
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  165
  110
  131
  153
  174
  193
  212
  227
  240
  249
  252
  254
  253
  247
  238
  226
  211
  194
  176
  157
  138
  119
  100
  83
  68
  54
  43
  33
  24
  18
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Five Below, Inc. is a specialty retailer offering a range of merchandise for teen and pre-teen customer. The Company offers an assortment of products, including select brands and licensed merchandise across a range of categories, including Style, Room, Sports, Tech, Crafts, Party, Candy and Now. Its product groups include leisure, fashion and home, and party and snack. Its Leisure includes items, such as sporting goods, games, toys, tech, books, electronic accessories, and arts and crafts. Its Fashion and home includes items, such as personal accessories, attitude t-shirts, beauty offerings, home goods and storage options. Its Party and snack includes items, such as party and seasonal goods, greeting cards, candy and other snacks, and beverages. The Company operated 522 locations across over 31 states throughout the Northeast, South and Midwest regions of the United States, as of January 29, 2017. Its typical store featured 4,000 stock-keeping units (SKUs), as of January 29, 2017.

FINANCIAL RATIOS  of  Five Below, Inc. (FIVE)

Valuation Ratios
P/E Ratio 89.2
Price to Sales 6.4
Price to Book 19.4
Price to Tangible Book
Price to Cash Flow 60
Price to Free Cash Flow 103.6
Growth Rates
Sales Growth Rate 20.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.1%
Cap. Spend. - 3 Yr. Gr. Rate 11.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 16.1%
Ret/ On Assets - 3 Yr. Avg. 17.1%
Return On Total Capital 25%
Ret/ On T. Cap. - 3 Yr. Avg. 27.9%
Return On Equity 25%
Return On Equity - 3 Yr. Avg. 28.6%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 35.7%
Gross Margin - 3 Yr. Avg. 35.3%
EBITDA Margin 14.1%
EBITDA Margin - 3 Yr. Avg. 13.9%
Operating Margin 11.4%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 11.4%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 7.2%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 0%

FIVE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FIVE stock intrinsic value calculation we used $1278 million for the last fiscal year's total revenue generated by Five Below, Inc.. The default revenue input number comes from 0001 income statement of Five Below, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FIVE stock valuation model: a) initial revenue growth rate of 21.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for FIVE is calculated based on our internal credit rating of Five Below, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Five Below, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FIVE stock the variable cost ratio is equal to 84.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $42 million in the base year in the intrinsic value calculation for FIVE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Five Below, Inc..

Corporate tax rate of 27% is the nominal tax rate for Five Below, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FIVE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FIVE are equal to 12.5%.

Life of production assets of 4.8 years is the average useful life of capital assets used in Five Below, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FIVE is equal to 5.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $458.558 million for Five Below, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 55.755 million for Five Below, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Five Below, Inc. at the current share price and the inputted number of shares is $6.5 billion.

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