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Why Sprouts Farmers (SFM) is a Top Value Stock for the Long-Term

Zacks Equity Research
·2 min read

Taking full advantage of the stock market and investing with confidence are common goals for new and old investors alike.

Many investors also have a go-to methodology that helps guide their buy and sell decisions. One way to find winning stocks based on your preferred way of investing is to use the Zacks Style Scores, which are indicators that rate stocks based on three widely-followed investing types: value, growth, and momentum.

Why Investors Should Pay Attention to This Value Stock

Value investors love finding good stocks at good prices, especially before the broader market catches on to a stock's true value. Utilizing ratios like P/E, PEG, Price/Sales, and Price/Cash Flow, the Value Style Score identifies the most attractive and most discounted stocks.

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Sprouts Farmers (SFM)

Sprouts Farmers Market, Inc., which operates in a highly fragmented grocery store industry, has a unique model that features fresh produce, foods section, and a vitamin department focused on overall wellness. Moreover, the company has been diversifying its offerings to meet changing preferences of consumers, who are looking for more health and wellness products. These products are generally plant-based, gluten-free, keto-friendly, and grass-fed. The company has been focusing on natural and organic food, which is one of the fastest growing segments in the industry.

SFM sits at a Zacks Rank #1 (Strong Buy), holds a Value Style Score of B, and has a VGM Score of B. Compared to the Food - Natural Foods Products industry's P/E of 12.5X, shares of Sprouts Farmers are trading at a forward P/E of 12.4X. SFM also has a PEG Ratio of 1.7, a Price/Cash Flow ratio of 6.5X, and a Price/Sales ratio of 0.5X.

A company's earnings performance is important for value investors as well. For fiscal 2022, six analysts revised their earnings estimate higher in the last 60 days for SFM, while the Zacks Consensus Estimate has increased $0.08 to $2.23 per share. SFM also holds an average earnings surprise of 15.6%.

SFM should be on investors' short lists because of its impressive earnings and valuation fundamentals, a good Zacks Rank, and strong Value and VGM Style Scores.


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Zacks Investment Research