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SFM vs. SOVO: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Food - Natural Foods Products sector have probably already heard of Sprouts Farmers (SFM - Free Report) and Sovos Brands, Inc. (SOVO - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Sprouts Farmers has a Zacks Rank of #2 (Buy), while Sovos Brands, Inc. has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SFM has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SFM currently has a forward P/E ratio of 13.59, while SOVO has a forward P/E of 26.76. We also note that SFM has a PEG ratio of 1.85. 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. SOVO currently has a PEG ratio of 3.20.
Another notable valuation metric for SFM is its P/B ratio of 3.25. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SOVO has a P/B of 3.28.
These metrics, and several others, help SFM earn a Value grade of A, while SOVO has been given a Value grade of C.
SFM stands above SOVO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SFM is the superior value option right now.