After an impressive earnings report earlier this month sent shares of Five Below (NASDAQ:FIVE) soaring 42% in a week, the tween and teen speciality retailer has maintained those lofty heights.

On the strength of higher revenues, rising comparable -store sales, and wider profit margins than either management or Wall Street expected, Five Below is soaring. And analysts anticipate it will keep up the torrid pace of growth.

Yet at 48 times trailing earnings and over 33 times next year's estimates, the retailer of trendy but cheap items is richly valued. It goes for over three times its sales and 50 times the free cash flow it produces. Although its earnings report offered investors a combination of good tidings, let's take a closer look at whether they should keep buying into its stock at these prices.

Five Below storefront

Specialty retailer Five Below continues to expand while growing sales. Image source: Five Below.

Building out the base

Five Below is in expansion mode. President and CEO Joel Anderson said the retailer is looking to expand well beyond the 658 stores it now operates, and foresees the day when Five Below has some 2,500 stores.

"With our continued and consistent success as we expand our store footprint and build out our distribution network, our conviction in the 2,500-plus store potential for Five Below only grows," Anderson told analysts during the company's earnings conference call.

Five Below opened 33 new stores during the quarter. It has opened 42 year to date, and expects to open 125 for all of 2018.

Previously, management said new stores account for 80% of its growth, and the rapid pace of expansion in the most recent quarter is largely responsible for the 27% increase in revenue, which reached $296.3 million. Comparable sales were up a modest 3.2%, and benefited from a calendar shift in comparing this year's results with last year's.

Boy with fidget spinner

There is no big item on the horizon to replace the fidget spinner craze. Image source: Getty Images.

No one-hit wonders

The comps numbers, while not worrisome, don't reflect as strong a result as you might expect. Five Below got a lift from seeing a bigger average ticket, while transactions fell slightly. Put another way, there were fewer customers, but they were spending more when they shopped. Like other retailers, Five Below was beset by a cold start to the year that kept consumers home, but also was going up against the fidget spinner craze of last year.

An item to replace the fidget spinner has yet to appear. And though Five Below has a portfolio of brands it keeps in store to help maintain sales, it's those big items like spinners and Silly Bandz that help juice returns.

That could be why management is forecasting that second-quarter comps will be flat. While it is going up against a huge 9% gain in 2017 due to the spinners, with full-year comps forecast to come in at just a 1% or 2% gain, the rest of this year is looking rather tepid.

Softening profits

Similarly, whereas operating profits nearly doubled from last year to $24.7 million, and net income surged 160% to $21.8 million, it got a lot of lift from not having the same kinds of expenses this time around as it did in 2017, when it was just entering the California market.

Add in a drop in incentive-based compensation and a lower tax rate, and Five Below's profitability soared. The tax benefit is ongoing, but the other tailwinds won't be there going forward. That's why the retailer is expecting full-year net income to be up between 36% and 39% year over year, which points to a flattening trend in each of the coming quarters.

Without question, Five Below is at the top of its game and is one of the premier specialty retailers in the market today. But when you look at its valuation compared to what may happen over the next 12 months, it is a richly valued stock.

Of course, investors should have a longer-term outlook than just the next few quarters. But if you're considering Five Below shares at these levels, there may be opportunities to buy this growth stock at significantly lower prices in the months ahead.

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