SFM Stock Study (1-9-26)

Posted by Mark on May 30, 2025 at 06:48 | Last modified: January 9, 2026 15:23

I recently studied Sprouts Farmers Market, Inc. (SFM, $77.09).

M* writes:

     > Sprouts Farmers Market Inc offers a specialty grocery experience
     > featuring an open layout with fresh produce at the heart of the
     > store. Sprouts inspire wellness naturally with a carefully
     > curated assortment products paired with purpose-driven people.
     > The company continues to bring products made with lifestyle-
     > friendly ingredients such as organic, plant-based, and gluten-free.
     > It approximately has 407 stores in nearly 23 states. The Company
     > has one operating segment that is healthy grocery stores.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 8.0% and 18.0%, respectively. Lines are up, straight, and parallel except for sales+EPS dip in ’21. Five-year EPS R^2 is 0.56 and Value Line (VL) gives an Earnings Predictability score of 80.

Over the past decade, PTPM leads peer and industry averages while ranging from 3.5% in ’19 to 6.6% in ’24 with last-5-year mean of 5.6%. ROE leads peer but trails industry averages despite increasing from 15.6% (’15) to 27.7% (’24) with last-5-year mean of 26.9%. Debt-to-Capital is less than the industry but greater than peer averages while increasing from 26.1% (’15) to 56.0% (’24) withi last-5-year mean of 59.7%.

Quick Ratio is 0.5 and Interest Coverage 398 per M* who assigns “Narrow” [quantitative] Economic Moat and gives a C grade for Financial Health (per BI website). VL rates the company B+ for Financial Strength (and reports Interest Coverage over 25).

With regard to sales growth:

• YF gives YOY ACE 14.1% and 9.9% for ’25 and ’26, respectively (based on 15 analysts).
• Zacks gives YOY ACE 14.2% and 9.6% for ’25 and ’26, respectively (4 analysts).
• VL projects 11.0% annualized growth from ’24-’29.
• CFRA projects 14.5% YOY and 12.1% per year for ’25 and ’24-’26, respectively.
• M* gives 2-year ACE of 11.8%/year.

My 9.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 19.8% and 17.1% per year for ’24-’26 and ’24-’27, respectively (based on 19 analysts).
• Nasdaq.com gives ACE 5.9% YOY and 7.0%/year for ’26 and ’25-’27 (5 / 5 / 3 analysts for ’25 / ’26 / ’27).
• Seeking Alpha projects 4-year annualized growth of 17.8%.
• Finviz gives ACE 5-year annualized growth of 20.2% (6).
• LSEG estimates LTG at 20.3%.
• YF gives YOY ACE 40.5% and 9.5% for ’25 and ’26, respectively (12).
• Zacks gives YOY ACE 40.5% and 5.9% for ’25 and ’26 (5) along with 5-year growth of 16.5%/year.
• VL projects 17.8% annualized growth from ’24-’29.
• CFRA projects growth of 40.8% YOY and 23.7% per year for ’25 and ’24-’26 along with 3-year CAGR of 27.0%.
• M* gives long-term growth ACE of 13.0%.

My 10.0% forecast is below the long-term estimate range (mean of six: 17.6%). Initial value is 2025 Q3 EPS of $5.17 (TTM) instead of ’24 EPS of $3.75/share.

My Forecast High P/E is 14.0. Over the past 10 years, high P/E ranges from 11.5 in ’20 to 46.3 in ’15 with a last-5-year mean of 20.4 and a last-5-year-mean average P/E of 15.1. I am near bottom of the range (only ’20 is less).

My Forecast Low P/E is 9.0. Over the past 10 years, low P/E ranges from 5.3 in ’20 to 22.5 in ’16 with a last-5-year mean of 9.7. I am forecasting near bottom of the range (only ’20 is less).

My Low Stock Price Forecast (LSPF) is $54.00. Default based on initial value given above ($46.50) seems extremely low at 39.7% less than previous close and 37.5% less than 52-week low. My arbitrary selection is 30.0% (27.4%) less, respectively.

These inputs land SFM in the HOLD zone with a U/D ratio of 1.7. Total Annualized Return (TAR) is 8.6%.

PAR (using Forecast Average—not High—P/E) of 4.4% is less than I seek for a medium size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 8.6% TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 73 studies in the past 90 days (my study and 38 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.8%, 12.2%, 19.4, and 9.7 respectively. I am lower across the board. VL projects a future average annual P/E of 18.0 that is greater than MS (14.6) and greater than mine (11.5).

MS high / low EPS are $8.88 / $5.00 versus my $8.33 / $5.17 (per share). My high EPS is less due to a lower growth rate. VL’s high EPS of $8.50 is in the middle.

MS LSPF of $51.70 implies a Forecast Low P/E of 10.3 versus the above-stated 9.7. MS LSPF is 6.6% greater than the default $5.00/share * 9.7 = $48.50 resulting in more aggressive zoning. MS LSPF is 6.2% less than mine, however.

MOS is robust in the study because my inputs are near or below historical/analyst/MS averages/ranges. Also suggestive of this assessment are MS TAR exceeding mine by 7.2% per year.

With regard to valuation, PEG is 0.84 and 1.4 per Zacks and my projected P/E, respectively: fairly valued (0.77 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 0.99. M* has the stock undervalued by 31%, though, and “Quick and Dirty DCF” has stock undervalued by 45%.

Per U/D, SFM is a BUY under $69.60/share. BI TAR criterion would be met [116.6 / ((14.87 / 100 ) +1 ) ^ 5] ~ $58 given a forecast high price ~$117 (no dividend).

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

Categories: BetterInvesting® | Comments (0) | Permalink