Sprouts Farmers Market (SFM) Is A Strong Growth Stock
Just days before Thanksgiving, many people begin to salivate over the plethora of food options that await them during this well-deserved respite. Thanksgiving week also gives many investors time to kick back, relax, and plot their next investments, whether it be the next hot tech stock or the best long-term value plays.
As many investors know already, growth stocks in the tech sector have become all the rage, and there are many valid reasons for this. Shares of technology companies, driven by Facebook FB, Apple AAPL, and others, currently stand above the rest of the market—as they did at the peak of the dot-com era. But unlike those days, today’s tech giants are actually turning massive profits and continuing to grow.
Still, finding companies that are poised to grow faster than the market average can be hard, even in the tech sector. Therefore, investors should also look for stocks with outsized growth potential in industries that might not be as flashy these days.
The organic grocery industry is one that many people wrote off after Amazon (AMZN) purchased Whole Foods. However, one company won’t be able to take over the entire health food economy, especially as the health-conscious consumer base rapidly expands.
Keeping all of this in mind, investors might think about looking into healthy grocery giant Sprouts Farmers Market SFM.
Sprouts is currently a Zacks Rank #1 (Strong Buy) and sports an “A” grade for Growth in our Style Scores system. Now, as many investors have food on their minds and free time on their hands, let’s take a look at this grocery stock with outsized growth potential.
Fundamentals
Based on our current Zacks Consensus Estimates, Sprouts’ revenues are projected to pop 14.64% in the fourth-quarter to hit $1.13 billion. For its full fiscal year, the company’s revenues are set to climb almost 15% to $4.65 billion.
Sprouts’ earnings are also set to climb nearly 14% in Q4, based on our consensus estimates. For the full fiscal year, Sprouts’ earnings are projected to surge 18.19%.
On top of that, Sprouts’ current sales to assets ratio of 2.99 tops the “Food – Natural Foods Products” industry’s average. Also, the grocer’s historic cash flow growth—the last 3-5 years, annualized—is 48.15%. This more than doubles its industry’s average and helps show that Sprouts has been improving its cash position in recent years.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise | Sprouts Farmers Market, Inc. Quote
Since 2014, Sprouts has matched or topped earnings estimates in all but two quarters. What’s more, within the last 60 days, Sprouts has received five upward earnings estimate revisions for its fourth-quarter. During this same timeframe, the company has earned nine positive revisions for its full-year earnings, against no downward changes.
Sprouts shares are up 12.63% so far this year. However, a majority of Sprouts’ positive movement, which matches the S&P 500 in 2017, occurred within the last four weeks. Still, growth minded investors should be happy to know that even with Sprouts’ Q4 growth projections and recent stock price surge, the healthy grocery company’s shares sit almost 16% below their 52-week high.
Lastly, for investors concerned that Sprouts might only be a growth play, the company also currently rocks a “B” grade for Value in our Style Scores system, helping it earn an overall “A” VGM score.
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