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Should Value Investors Buy Sprouts Farmers (SFM) Stock?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

Sprouts Farmers (SFM - Free Report) is a stock many investors are watching right now. SFM is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 14 right now. For comparison, its industry sports an average P/E of 16.13. Over the past year, SFM's Forward P/E has been as high as 17.67 and as low as 10.30, with a median of 12.75.

SFM is also sporting a PEG ratio of 1.52. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SFM's industry has an average PEG of 1.78 right now. SFM's PEG has been as high as 4.78 and as low as 1.12, with a median of 1.38, all within the past year.

Finally, our model also underscores that SFM has a P/CF ratio of 6.14. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 8.44. Over the past year, SFM's P/CF has been as high as 7.93 and as low as 4.48, with a median of 5.68.

These are only a few of the key metrics included in Sprouts Farmers's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SFM looks like an impressive value stock at the moment.


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