Is Five Below worth $1 billion?

Writes Reuters here: Philadelphia-based discount chain store operator Five Below "is in talks with bankers about an initial public offering, according to two sources familiar with the situation." 

Five Below, a chain of more than 100 mostly mid-Atlantic area stores, is run by former Zany Brainy owners Tom Vellios and David Schlessinger. Investors include LLR Partners, based at Cira Center, backed by Ira Lubert and Pennsylvania state pension funds; along with  Boston's Advent International.

"Five Below generates earnings before interest, taxes, depreciation and amortization of $45 million to $50 million," and is growing quickly, Reuters said, citing an unnamed source familiar with the company's efforts to hire investment banks.

"Five Below would likely be compared against other discount stores when it markets its IPO, said the source. These companies, like Dollar General and Dollar Tree, are both trading at over 20 times forward earnings. If valued against this multiple, Five Below could command a market valuation of over $1 billion."

Five Below didn't return Reuters' calls; LLR and Advent "declined comment."

No doubt someone has plans for Five Below. Though with an unnamed-source plant like this it's tough to know if there really is an IPO in the works, or someone's trying to tease a price for a private stock sale.

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