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Shares Of Five Below Drop Following Negative Report By Kerrisdale

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Kerrisdale Capital published a negative blog post on Five Below (NASDAQ: FIVE). Following the post from the known-bearish firm, shares of Five Below were trading down just over three percent.

The blog began, "We believe that Five Below is highly overvalued." However, above this was a disclaimer alerting readers that the firm is short on the company's shares.

The main reasons the firm listed to support the claim that Five Below is "highly overvalued" included:

  • High valuation multiples (3x LTM revenue and 25x LTM EBITDA).
  • Mediocre same-store sales growth.
  • Long-term margin pressure.
  • A highly competitive market segment (2,000+ Wal-Mart Express store expected to open over the next five years).

In terms of valuation the firm wrote, "Our DCF yields a valuation for FIVE of approximately $23 / share, well below the current price of $35."

Shares of Five Below are currently down less than one percent at $36.79.

 

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