Sprouts Farmers Market (SFM) Company Overview & Stock Price Forecast
This article provides a brief analysis and stock rating for Sprouts Farmers Market (SFM) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.
Sprouts Farmers Market Fundamentals
Stock Price Target: $33.49
In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Sprouts Farmers Market in comparison to the Grocery/Food Retail industry and the S&P 500.
Sprouts Farmers Market is a Small Cap company with a Market Cap of $3.03B.
How are investors using Sprouts Farmers Market earnings yield to assess the company?
The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).
The current earnings yield for Sprouts Farmers Market is 25.06%%, in comparison to 3.37% for the S&P 500 and 1.48% for the 10-year treasury bond. The median earnings yield for the Grocery/Food industry is 11.25%.
What does Sprouts Farmers Market Price-to-Earnings Ratio (P/E) tell investors about the company?
The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings.
Sprouts Farmers Market is currently trading at a P/E of 11.19. The P/E for the Grocery/Food industry is 29.60 and the P/E for the S&P 500 is 29.68.
What is the current Price-to-Sales Ratio (P/S) for Sprouts Farmers Market?
The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.
Sprouts Farmers Market is currently trading at a P/S of 0.48. The P/S for the Grocery/Food industry is 0.21 and the P/S for the S&P 500 is 3.22.
How does Sprouts Farmers Market Price-to-BookRatio (P/B) compare to the Grocery/Food Retail industry?
Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.
Sprouts Farmers Market P/B ratio is 3.52. The P/B for the Grocery/Food industry is 2.51 and the P/B for the S&P 500 is 4.86.
How attractive is Sprouts Farmers Market Return on Invested Capital (ROIC) to investors?
Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.
Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.
Sprouts Farmers Market ROIC is currently 12.33% in comparison to 9.46% for the Grocery/Food industry and 8.60% for the S&P 500.
What is Sprouts Farmers Market YTD Performance in comparison to its industry and the total market?
The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year.
The YTD performance for Sprouts Farmers Market is 33.28%. The Grocery/Food industry has a YTD performance of 20.14% in comparison to the YTD S&P 500 performance of 25.45%.
Recent Financial Results
- Net sales of $1.5B, a 4% decrease from the same period in 2020 and a 5% increase from the same period in 2019
- Comparable store sales growth of -5.4% and two-year comparable store sales growth of -2.1%
- Net income of $64M compared to net income of $60M and adjusted net income of $62M in the same period in 2020 (net income of $26M for the same period in 2019)
- Diluted earnings per share of $0.56 compared to $0.51 diluted earnings per share and adjusted diluted earnings per share of $0.52 in the same period in 2020 ($0.22 diluted earnings per share from the same period in 2019)
Stock Price Target: $33.49
Sprouts Farmers Market offers fresh, natural, and organic food products in the US. It operates through Healthy Grocery Stores segment. Sprouts offers both perishable product categories and non-perishable product categories.
As of July 2021, the company operated 363 stores in 23 states. Sprouts Farmers Market was founded in 2002 and is headquartered in Phoenix, Arizona. The current CEO is Jack Sinclair.
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This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.