CNBC's Jim Cramer stated that Wall Street is misreading Five Below's latest quarter by focusing on slowing comparable sales growth despite another earnings beat and raised outlook.
He noted that the muted stock reaction could be a buying opportunity, with Five Below's higher earnings forecast pushing its valuation down to roughly 24 times earnings.
Shares of Five Below popped at Thursday's open after the discount retailer beat expectations for its fiscal second quarter and raised its full-year guidance the prior evening.
However, the gains quickly fizzled, and the stock finished the day down 1.3%.
"This stock deserved to jump nearly 7% and it's insane that those gains evaporated," the "Mad Money" host said.
Cramer said investors appear overly focused on signs that Five Below's extraordinary comparable sales growth has peaked. The latest quarter's 14.1% increase slowed from 22.7% in the first quarter, and the company's full-year forecast implies further deceleration over the remainder of the year.
However, he said Five Below's 14.1% comp sales still handily exceeded Wall Street's expectations.
"While, sure, mathematically, Five Below's same-store sales are decelerating, that's just the law of large numbers," Cramer said. "I don't know how anyone looks at that and sees it as a sign of weakness."
Instead, he said investors should focus on the turnaround under CEO Winnie Park, and what her leadership could mean for future results.
Five Below has now beaten expectations in each of the six quarters she has overseen.
"I think her strategy is obviously working and the stock's simply not getting much credit for it because Wall Street's worried about higher oil prices putting pressure on the consumer, so people find endlessly reasons to quibble over an objectively great set of numbers," Cramer said.
Five Below's new full-year comparable sales forecast calls for growth in the range of 10% to 12%, up from 6% to 8%.
It also boosted its adjusted earnings outlook to between $9.83 and $10.31 per share.
Cramer said that stronger outlook, combined with the stock's muted reaction, has made Five Below cheaper.
He said shares went from trading at roughly 27.5 times the midpoint of the company's earnings forecast before the report to around 24 times after it.
"With the midpoint of the new, higher earnings forecast implying more than 50% growth versus last year, that strikes me as an incredibly fair price to pay. Honestly, I'd call it a steal," Cramer said.
