Update: Sprouts Farmers Market, Great Quarter

| About: Sprouts Farmers (SFM)
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Sprouts beat analysts' estimates of 18 cents a share by earning 20 cents per share in Q2 2014.

This confirms my opinion that the stock is a great long term investment.

I was right about this company being a great investment as I recommended it at its 52-week low. This was perfect timing.

Sprouts (NASDAQ:SFM) reported revenues of $743.8 million, which beat the street's estimate of $741.05 million. This was a 20% increase from last year. Same store sales increased 9.5% and the two year combined pro forma same store sales growth was 20.3%. Adjusted net income increased 68% to $30.2 million from $18 million last year. Adjusted earnings per share went from 14 cents a share last year to 20 cents per share this quarter. Adjusted EBITDA was $69.1 million which was a 31% increase. Gross profit was 30.1% which was consistent with the same period last year. Direct store expense decreased 60 basis points from last year to 19.2%.

Guidance for the third quarter is for same store sales to be in the range of 8.5% to 9.5%. Two year combined pro forma comparable same store sales are expected to be between 18.5% and 19.5%. The company raised its full year guidance. Net sales growth is now expected to be between 19% and 20%. The company now expects to open 24 stores this year. Its new adjusted EBITDA growth is expected to be 25% to 27%. Adjusted net income growth is now expected to be 45% plus. The new adjusted diluted earnings per share is expected to be 65 cents to 67 cents. Adjusted diluted earnings per share growth is expected to be 35% to 40%.

Since my last article "Firing On All Cylinders, Yet Trading At A 52-Week Low- Sprouts Farmers Market", the stock has increased. Right now, the company is still suffering from having such a high multiple at its IPO. The company was overvalued at $40, but now that it has corrected to $30 and has reported spectacular same store sales growth rates, it has become undervalued. The stock will increase by the end of the year and it is even more of a strong buy than when I recommended it back in May.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.