Insiders Trim Positions in Five Below Stock After 39% Run-Up

Five Below (NASDAQ: FIVE), the discount retail chain, has had a pretty good summer. The stock price has surged some 39% over the past two months to around $245 per share. It hit an all-time closing high of $262 per share on Aug. 24 and has returned about 68% over the past 12 months, including a 30% year-to-date return.

This past week, two Five Below insiders sold a slew of shares, according to Securities and Exchange Commission (SEC) filings. On Sept. 4, Director Michael Devine sold roughly 4,250 shares in two batches. He sold about 3,400 shares for $250.44 per share and then sold 850 shares for $251.28 per share. The total value of the sales was about $1.1 million.

Devine still holds 12,953 shares of company stock which, at the current share price of $243, would be approximately $3.1 million.

Image source: Getty Images.

On the same day, Chief Operating Officer Kenneth Bull sold about 1,510 shares in a series of transactions. The share price at the time of sale had ranged from $240 per share to $255 per share in what was a wild day of trading. At an average share price of $248 per share, the total amount sold was roughly $2.6 million.

Bull still holds about 75,064 shares which, at the current share price of $243, would be approximately $18.2 million.

Surging sales

The insider sales came shortly after the retail stock posted strong second-quarter earnings results on Sept. 2. Net sales spiked 23% to $1.3 billion while comparable store sales surged 14% year over year. In addition, the chain opened 52 net new stores and ended the quarter with 2,022 stores in 46 states, up 9% year over year.

Adjusted operating income soared 105% to $113 million, while adjusted net income rose 108% to $93.4 million, or $1.68 per share.

In addition, Five Below raised its guidance for the full fiscal year. It now expects $5.63 billion to $5.71 billion in net sales, up from the previous range of $5.4 billion to $5.48 billion. Comp sales are anticipated to grow 10% to 12%, up from the previous range of 6% to 8%, and adjusted earnings per share are targeted for $9.83 to $10.31, up from the previous target of $8.65 to $9.05.

Management also launched a $600 million share buyback program.

Should you buy or sell Five Below?

Five Below stock got a slew of analyst price target upgrades after the earnings and outlook were released. Most notably, Morgan Stanley boosted it by $65 to $300 per share while UBS raised it $40 to $325 per share.

Some 67% of Wall Street analysts rate Five Below stock as a buy with a median price target of $300 per share. That would suggest 24% upside.

Five Below does indeed look like a solid buy as it's still at a decent valuation, even after such a big spike in the share price. It is trading at 22 times earnings, 23 times forward earnings, and has a PEG ratio of 0.98. indicating its relative long-term value.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.