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Sprouts Farmers Market, Inc. (SFM) Hits Fresh High: Is There Still Room to Run?
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Have you been paying attention to shares of Sprouts Farmers (SFM - Free Report) ? Shares have been on the move with the stock up 22.6% over the past month. The stock hit a new 52-week high of $78.28 in the previous session. Sprouts Farmers has gained 60.8% since the start of the year compared to the 11.1% move for the Zacks Retail-Wholesale sector and the 22% 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 May 1, 2024, Sprouts Farmers reported EPS of $1.12 versus consensus estimate of $1 while it beat the consensus revenue estimate by 2.2%.
For the current fiscal year, Sprouts Farmers is expected to post earnings of $3.11 per share on $7.38 billion in revenues. This represents a 9.51% change in EPS on a 7.98% change in revenues. For the next fiscal year, the company is expected to earn $3.36 per share on $7.99 billion in revenues. This represents a year-over-year change of 8.01% and 8.16%, 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 C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 24.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 17.6X. On a trailing cash flow basis, the stock currently trades at 14.1X versus its peer group's average of 11.2X. Additionally, the stock has a PEG ratio of 2.76. 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 #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
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 still be poised for more gains ahead.
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Sprouts Farmers Market, Inc. (SFM) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Sprouts Farmers (SFM - Free Report) ? Shares have been on the move with the stock up 22.6% over the past month. The stock hit a new 52-week high of $78.28 in the previous session. Sprouts Farmers has gained 60.8% since the start of the year compared to the 11.1% move for the Zacks Retail-Wholesale sector and the 22% 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 May 1, 2024, Sprouts Farmers reported EPS of $1.12 versus consensus estimate of $1 while it beat the consensus revenue estimate by 2.2%.
For the current fiscal year, Sprouts Farmers is expected to post earnings of $3.11 per share on $7.38 billion in revenues. This represents a 9.51% change in EPS on a 7.98% change in revenues. For the next fiscal year, the company is expected to earn $3.36 per share on $7.99 billion in revenues. This represents a year-over-year change of 8.01% and 8.16%, 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 C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 24.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 17.6X. On a trailing cash flow basis, the stock currently trades at 14.1X versus its peer group's average of 11.2X. Additionally, the stock has a PEG ratio of 2.76. 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 #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
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 still be poised for more gains ahead.