Should you buy this growth stock after it fell 24% in 2024?

Thanks to its 18-month run, the Nasdaq Composite index may be in record territory. However, investors can still uncover enticing possibilities. Five Below (NASDAQ: FIVE) shares are down 24% this year as of April 8. Despite the downtrend, investors may want to consider this growing stock. Should you purchase this discounter on the drop?

Investor disappointment Five Below shares have fallen since reporting its fiscal 2023 fourth quarter results (ending Feb. 3). Wall Street experts were disappointed by the numbers. The situation didn't seem bad. Five Below increased revenue and EPS 19%. Although they missed consensus predictions, these headline results were promising. They demonstrate the company is growing rapidly despite macro uncertainty.  

Perhaps the market didn't like management's forecast. The company expects fiscal 2024 revenue to climb 12.9% (at the midpoint), with same-store sales up 1.5%. Current forecasts are slower than previous years.  

Bigger picture focus Investors who care about a company's long-term prognosis should look beyond a quarter's performance. This perspective can illuminate Five Below. Growth is this company's tale. Fiscal 2023 saw 204 net new Five Below stores, and as of Feb. 3, there were 1,544 countrywide. It rose from 552 seven years earlier. It has boosted revenue significantly.  

The management team wants more. Management expects 2,300 and 3,500 outlets between 2026 and 2030. That suggests significant expansion is planned. Investors may like this method. Five Below stores average $500,000 to open. Sales are $2.2 million in its first year. Executives want to open facilities quickly because they see plenty of potential in California and Texas, which are densely populated.

Historical success makes this method impossible to ignore. Revenue and EPS have grown 17.9% and 15.3% annually over the past five years. As with any retail business, Five Below confronts a lot of competition. The company has done well serving low-income families. It must continuously compete with Amazon, Walmart, and Dollar General for customers. That casts doubt on Five Below's longevity.  

Care about growth or value? I suggest buying Five Below shares on the drop. That only applies if growth is your priority. Company growth in the last decade is impressive. Revenue and profitability can rise if this trend continues.

Value investors would hesitate to acquire the shares. Five Below has a 30 P/E. That's costly. It's far above the S&P 500 and comparable to the tech-heavy Nasdaq 100. That may discourage share purchases. Ultimately, your investment style matters.  

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