Our first idea, a specialty retailer, beat analysts’ EPS estimates by five cents a share last quarter, and 16 analysts have increased their earnings forecasts in the past 30 days. Our second recommendation is partial profit-taking.
Five Below (FIVE)
From Cabot Growth Investor
Five Below’s (FIVE) growth story continues to play out, with the company reporting a terrific quarterly report late last week. Revenues grew 29%, driven by a very healthy 8.5% hike in same-store sales, while earnings lifted 80% to 18 cents per share, five cents ahead of estimates. The firm also opened a mammoth 41 new stores in the quarter, ending October with 625 stores; encouragingly, management said unit volumes at new stores opened this year are on track to be the largest in the company’s history.
Guidance for the busy fourth quarter was hiked, and the stock has been acting well, rallying to new highs before and after the news and moving further above the breakout level of its four-year consolidation (near 55). Retail stocks have actually gathered strength as traditional growth stocks have gotten hit, and FIVE is clearly one of the leaders. We’ll stay on Buy, though try to get in on dips of a couple of points.
Michael Cintolo, Cabot Growth Investor, www.cabotwealth.com, 978-745-5532, December 6, 2017