Five Below (FIVE 0.79%) just posted its fiscal 2024 first-quarter financial results, and the market was not happy with the report. Revenue and earnings per share came in at $812 million and $0.57, respectively. However, both of these headline figures missed Wall Street estimates.

The shares keep dropping, falling 47% so far in 2024, and they're currently 52% off their peak price. Before you buy the dip on this retail stock, here are three facts you need to know.

Clear growth strategy

At Five Below, growth is the key theme. The company generated $3.6 billion of sales in fiscal 2023 (ended Feb. 3). That was a whopping 125% higher than just five years earlier. Management's main focus has been to quickly expand the store base. After opening 61 net new stores in the latest fiscal quarter, there are now 1,605 Five Below locations scattered across the U.S.

But the momentum isn't coming to an end anytime soon. The leadership team wants to have 3,500 stores open by 2030. That implies a more than twofold increase from the size of the current footprint. There is meaningful opportunity in populated states like California, Texas, and Florida.

It costs about $500,000 to build and open a new store. However, in the first year after opening, the average Five Below will bring in $2.2 million in revenue and $500,000 in earnings before interest, taxes, depreciation, and amortization. These are solid unit economics.

It's also remarkable that Five Below is executing all this growth with zero debt on the balance sheet. This reduces financial risk and makes the business more resilient to economic downturns.

Competitive landscape

Five Below's growth has been tremendous, but that doesn't mean it's going to continue to be a smooth ride going forward. Competition is probably the biggest risk factor investors need to watch. The retail sector is arguably the most difficult for finding lasting success.

Five Below goes up against other discount-focused retailers, such as Walmart and Dollar General, for example. Not only do these companies compete for favorable real estate when building stores, but they also have the resources, brand recognition, and reach to serve customers.

In the past decade or more, the rise of online shopping has created a major headwind for all brick-and-mortar retailers. To its credit, though, Five Below has still expanded at a rapid clip during this time. But it's hard to argue with the convenience that top e-commerce operators can provide consumers.

I'm speaking of Amazon here. The tech juggernaut offers millions of products at low prices, with a sprawling logistics footprint that enables fast free shipping. This business might prove to be Five Below's most formidable opponent as it tries to get to 3,500 stores one day.

Current valuation

In the past five years, shares of Five Below have been a huge disappointment, down a dismal 14%. This is in stark contrast to the 87% and 125% rise, respectively, of the S&P 500 and the Nasdaq Composite index. You'd think the business is struggling mightily or that it's on the verge of bankruptcy.

But this couldn't be further from the truth; Five Below continues to increase its revenue and earnings.

This poor share-price performance might present investors with an opportunity. The stock looks reasonably valued right now. It trades at a price-to-earnings ratio of 21.4. This is less than half the 45.6 average multiple shares have carried since June 2019.

Investors considering buying Five Below now have some more information about the company that they can incorporate in their portfolio decision-making process.