The average target price of SFM is 188 and suggests 17% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 211.0. This translates into 31% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 155.0. This is equivalent to 4% downside potential in the worst case. 

Sprouts Farmers Market, Inc. offers fresh, natural, and organic food products in the United States. The company offers perishable product categories, including fresh produce, meat, seafood, deli, bakery, floral and dairy, and dairy alternatives; and non-perishable product categories, such as grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care. As of January 2, 2022, it operated 374 stores in 23 states. Sprouts Farmers Market, Inc. was founded in 2002 and is headquartered in Phoenix, Arizona.

Sprouts Farmers Market, Inc.

Consumer Defensive

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

SFM reported revenue of USD 8 072mn in the last 12 months, up 5% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 18% from FY24 to USD 4.47. Market expects EPS to reach USD 3.70 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 7ppts and its growth decelerated by 2ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 10.8% in the last 12 months, up from 9.4% in FY23. 

Historically, SFM has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 5.5%, a growth from 3.8% in FY23. 

Sprouts Farmers Market, Inc. reported a return on equity (RoE) of 36.7% in the last 12 months, up from 23.6% in FY23. The market consensus projects an RoE of 29.8% in FY24, again ahead of its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 15.5%, above the peers. The consensus estimate for FY24 for RoCE is 18.4%, again ahead of the peers. 

Another important profitability metric, return on assets (RoA), amounted to 12.6% in the last 12 months, an increase from 8.1% in FY23. The market analysts predict that RoA will be 10.3% in FY24, again stronger than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.6 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

SFM boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is minimal. We note solid return on capital and adequate interest coverage, among the positive credit factors. Among the negative credit factors, we point to slow historical revenue growth, bleak profitability, and poor working capital management.

In highly turbulent market conditions, SFM is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, SFM is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. 

From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. Specifically, the stock is 'expensive' on P/E, overvalued on EV/EBITDA, overpriced on P/FCF. 

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Sprouts Farmers Market, Inc.

$ 161.07

5

Sprouts Farmers Market, Inc.

$ 161.07

5

Risk factor

Profitability factor

Risk / Profitability

About

About

Risk factor

Profitability factor

$ 161.07

About

About

Sprouts Farmers Market, Inc.

$ 161.07

5

Sprouts Farmers Market, Inc.

$ 161.07

5

Risk factor

Profitability factor

Risk / Profitability

About

About

Risk factor

Profitability factor

$ 161.07

About

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