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Five Below (FIVE) Soars 6%: Is Further Upside Left in the Stock?

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Five Below FIVE shares soared 6% in the last trading session to close at $186.31. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 3.5% loss over the past four weeks.

Shares of Five Below have gained owing to the optimism surrounding its growth prospects. Morgan Stanley analyst upgraded the recommendation on the stock, per media reports. The company’s commitment toward enhancing merchandise assortment, strengthening digital footprint and achieving efficient cost structure is commendable. The company has been digitizing vendor transactions, implementing core merchandising platform and applying cloud-based data and analytics to analyze demand, and accordingly manage inventory.

This discount retailer is expected to post quarterly earnings of $0.28 per share in its upcoming report, which represents a year-over-year change of -22.2%. Revenues are expected to be $561.71 million, up 17.9% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Five Below, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on FIVE going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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