Have you been paying attention to shares of Sprouts Farmers (SFM)? Shares have been on the move with the stock up 27.2% over the past month. The stock hit a new 52-week high of $178.46 in the previous session. Sprouts Farmers has gained 39.4% since the start of the year compared to the 9.2% move for the Zacks Retail-Wholesale sector and the 20.6% return for the Zacks Food - Natural Foods Products industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 30, 2024, Sprouts Farmers reported EPS of $0.91 versus consensus estimate of $0.77.
For the current fiscal year, Sprouts Farmers is expected to post earnings of $4.23 per share on $7.67 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $4.69 per share on $8.44 billion in revenues. This represents a year-over-year change of 14.63% and 9.97%, respectively.
Valuation Metrics
Sprouts Farmers may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Sprouts Farmers has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 41.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 19X. On a trailing cash flow basis, the stock currently trades at 32.2X versus its peer group's average of 14.7X. Additionally, the stock has a PEG ratio of 2.28. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Sprouts Farmers currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Sprouts Farmers passes the test. Thus, it seems as though Sprouts Farmers shares could have a bit more room to run in the near term.
Just Released: Zacks Top 10 Stocks for 2025
Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential.
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
