Five Below’s Bullish Price Surprise Shouldn’t Surprise Anyone

Pennsylvania-based value retailer Five Below (FIVE) reported outstanding holiday sales yesterday (November 2, 2025, through January 3, 2026). The shares jumped nearly 5% on the news, trading within pennies of their 52-week high. 

FIVE was the 99th most bullish price surprise in Monday’s trading, with a 2.49 standard deviation and volume of 1.66 million, 1.4 times its 30-day average. 

Fidelity does a good job of explaining the importance of standard deviation in stock prices. 

“Standard deviation is the statistical measure of market volatility, measuring how widely prices are dispersed from the average price,” Fidelity’s website states.  

“If prices trade in a narrow trading range, the standard deviation will return a low value that indicates low volatility. Conversely, if prices swing wildly up and down, then standard deviation returns a high value that indicates high volatility.”

Five Below’s relatively high standard deviation indicates increased volatility in its share price. While that cuts both ways, the Barchart Technical Opinion for FIVE is a Strong Buy. 

Investors shouldn’t be surprised by Five Below’s bullish price surprise. Here’s why it should have more room to run in 2026. 

The Glass Is Half Full for Five Below

Five Below's stock is up nearly 104% over the past 12 months. That’s the good news. The bad news is that it’s appreciated by just 7.3% over the past five years, and is down 14% from its Aug. 25, 2021, all-time high of $237.86.

Once the darling of retail investors, the company has only in the past year begun to deliver on its earlier promise. The holiday sales report is one indication of its renewed strength. 

• Holiday sales increased by 23.2% to $1.47 billion, the second consecutive quarter with sales in excess of $1 billion.
• Same-store sales were up 14.5%
• Raised its outlook for both the fourth quarter and fiscal 2025 (January 31 year-end)
• Revenues should increase by 22.4% in 2025 to $4.75 billion, driven by 12.5% same-store sales growth, 15.2 percentage points higher than in 2024.
• Adjusted earnings per share should be $6.325 a share at the midpoint of guidance, 25.5% higher than in 2024.
• It has opened 136 net new stores through the first three quarters of 2025. It expects to open 150 for the full year, down from 227 in 2024.  

While some investors may view the retailer’s slowdown in store openings as a sign that sales are moderating, the company remains confident it can reach 3,500 stores across the U.S. 

As of Nov. 1, 2025, it had 1,907. At a moderate net-new store opening rate of 150 per year, it would take more than 10 years to reach this target. 

It’s Not Just About Store Openings

One thing that gets lost in reporting new store openings is the quality of those locations. It’s not enough to open 200 new stores if the locations are awful. They have to be prime properties with consistently high foot traffic.

As the business simplifies its pricing, it should also focus on securing the best possible leases to drive long-term sales growth. 

In the Q3 2025 conference call, CEO Winnie Park, who’s only been in the role since December 2024, focused on delivering value beyond $5. 

“Today, value is not just about $5 and below, but ensuring we pack value into $7, $10, and $15-plus items,” Park stated. “We are able to incorporate these multiple price points throughout the departments and the store to simplify the shopping experience, and our customers have responded well.”

There was concern among investors that tariffs on China, where it sources many of its products, would hurt Five Below. That hasn’t happened. Over the past five third quarters, according to S&P Global Market Intelligence, Five Below’s Q3 2025 gross margin of 33.8% was the highest. 

That, to some extent, was the flexibility gained from having price points above $5. Not only does it help maintain gross margins, but it also increases the customer base. 

That reduces the importance of new store openings. Sure, it will continue to open new stores, but having a pricing model that more broadly meets customer needs will certainly help sustain revenue and profit growth, which are the drivers of higher share prices.

The Bottom Line on Five Below Stock

Analysts are lukewarm about FIVE. Of the 27 covering it, 14 rate it a Buy (52% of analysts, below the S&P 500 average of 57.7%), with a target price of $203, barely above its current share price. 

Valuation has largely driven this lack of enthusiasm. Based on Five Below’s 2025 EPS guidance, its stock trades at 31.9 times this estimate. A 10% bump in 2026 translates to a forward P/E of 29.0x, not much better. 

I’ve followed Five Below for years. I think it’s a discount store with a unique focus that sets it apart from its peers: Dollar General (DG) and Dollar Tree (DLTR). Over the past year, they’ve all performed within a tight range, all three doubling, or nearly so. 

From where I sit, FIVE’s developing a business model that, over time, should deliver higher margins that are competitive with or higher than its larger peers. 

In July 2024, I said this about Five Below:

“The retailer’s enterprise value is currently 1.91x its trailing 12-month sales. That is the lowest multiple in the past decade, while its operating margin is 8.1% according to S&P Global Market Intelligence, its lowest since fiscal 2020, but still reasonably healthy,” I wrote on July 19, 2024.” 

“Virtually every metric screams undervalued.”

At the time, its shares were trading at $77. The EV/TTM sales multiple is now 2.87x. That seems high. However, the multiple in August 2021, when shares hit an all-time high, was 4.16x. 

If it returns to that level in 2026, based on its 2025 sales guidance of $4.75 billion, the enterprise value should be $19.76 billion, with a market cap of $18.27 billion [EV of $19.76B - $2.01B total debt + $525M cash], 63% higher than where it is today. 

It’s not a sure thing, but aggressive investors might want to consider it.