Reviewing Target (TGT) & Five Below (FIVE)

Target (NYSE: TGT) and Five Below (NASDAQ:FIVE) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, profitability, institutional ownership, earnings, valuation, dividends and analyst recommendations.

Risk & Volatility

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Target has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500. Comparatively, Five Below has a beta of 0.58, indicating that its stock price is 42% less volatile than the S&P 500.

Profitability

This table compares Target and Five Below’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Target 4.08% 23.04% 6.71%
Five Below 8.02% 26.00% 16.40%

Earnings & Valuation

This table compares Target and Five Below’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Target $71.88 billion 0.54 $2.93 billion $4.71 15.11
Five Below $1.28 billion 3.14 $102.45 million $1.79 40.46

Target has higher revenue and earnings than Five Below. Target is trading at a lower price-to-earnings ratio than Five Below, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

87.2% of Target shares are held by institutional investors. 0.2% of Target shares are held by insiders. Comparatively, 2.9% of Five Below shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Dividends

Target pays an annual dividend of $2.48 per share and has a dividend yield of 3.5%. Five Below does not pay a dividend. Target pays out 52.7% of its earnings in the form of a dividend. Target has raised its dividend for 50 consecutive years.

Analyst Recommendations

This is a summary of recent ratings and price targets for Target and Five Below, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Target 1 11 7 0 2.32
Five Below 0 7 9 0 2.56

Target currently has a consensus price target of $73.24, suggesting a potential upside of 2.87%. Five Below has a consensus price target of $63.27, suggesting a potential downside of 12.65%. Given Target’s higher probable upside, research analysts clearly believe Target is more favorable than Five Below.

Summary

Five Below beats Target on 9 of the 17 factors compared between the two stocks.

About Target

Target Corporation operates as a general merchandise retailer in the United States. The company offers beauty and household essentials, including beauty products, personal and baby care products, cleaning products, paper products, and pet supplies; food and beverage products, such as dry grocery, dairy, frozen food, beverage, candy, snacks, deli, bakery, meat, and produce products; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. It also provides home furnishings and décor comprising furniture, lighting, kitchenware, small appliances, home décor, bed and bath products, home improvement products, and automotive products, as well as seasonal merchandise comprising patio furniture and holiday décor; and music, movies, books, computer software, sporting goods, and toys, as well as electronics that include video game hardware and software. In addition, the company offers in-store amenities, which comprise Target Café, Target Optical, Starbucks, and other food service offerings. It sells its products through its stores; and digital channels, including Target.com. As of March 8, 2018, the company operated 1,826 stores. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota.

About Five Below

Five Below, Inc. operates as a specialty value retailer in the United States. It offers accessories, including novelty socks, sunglasses, jewelry, scarves, gloves, hair accessories, athletic tops and bottoms, and T-shirts, as well as beauty products comprising nail polish, lip gloss, fragrance, and branded cosmetics; and items used to complete and personalize living space, including glitter lamps, posters, frames, fleece blankets, plush items, pillows, candles, incense, lighting, novelty décor, and related items, as well as provides storage options for the customers room. The company also provides sport balls; team sports merchandise and fitness accessories, such as hand weights, jump ropes, and gym balls; games, including name brand board games, puzzles, collectibles, and toys; and pool, beach and outdoor toys, games, and accessories. In addition, it offers accessories, such as cases, chargers, headphones, and other related items for cell phones, tablet, audio, and computers; books, video games, and DVDs; craft activity kits; arts and crafts supplies that consist of crayons, markers, and stickers; and trend-right items for school comprising backpacks, fashion notebooks and journals, novelty pens and pencils, locker accessories, and everyday name brand items. Further, the company provides party goods, decorations, gag gifts, and greeting cards, as well as every day and special occasion merchandise products; assortment of classic and novelty candy bars, movie-size box candy, seasonal-related candy, and gum and snack food; chilled drinks through coolers; and seasonally-specific items used to celebrate and decorate for events. It primarily serves teen and pre-teen customers. As of February 3, 2018, it operated 625 stores in 32 states. The company was formerly known as Cheap Holdings, Inc. and changed its name to Five Below, Inc. in August 2002. Five Below, Inc. was founded in 2002 and is headquartered in Philadelphia, Pennsylvania.

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