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Sprouts Farmers Market Is A Good Stock Despite Concerns About Margin Compression

StockBros Research profile picture
StockBros Research


  • Sprouts Farmers Market is a strong niche grocer that has seen steady revenue growth over the years.
  • The company's performance and efficiency metrics stack up well against more established competitors.
  • The company's valuation suggests that there is a good margin of safety at today's price.

Healthy fresh rainbow colored fruits and vegetables background
Photo by fcafotodigital/E+ via Getty Images

If you're from the USA (we're not), you are probably familiar with Sprouts Farmers Market, Inc. (NASDAQ:SFM). If not, here's a quick intro. Sprouts operates grocery stores that offer fresh, natural, and organic food products in

This article was written by

StockBros Research profile picture
Two bros that talk about stocks, mainly GARP (growth at a reasonable price) stocks, but we look for opportunities everywhere. We don't have a specified time horizon. We invest in a stock for as long as our thesis holds true, and get out when the facts change. In addition, we've developed market-beating algorithms with python that help us find attractive investment opportunities within our own portfolios.Website: www.stockbrosresearch.comTwitter: @StockBrosTrades

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (11)

Very Thorough article, thanks for the info. Buffet recently took a long position in Kroger which seems to be the low cost provider in this space in prep for a possible recession. In your opinion, do you think this company has the muster to withstand a Macroeconomic downturn with high margins?
Interested in your insight, thanks.
Risk Research Inc profile picture
Excellent article, thanks. I take a somewhat different approach -- I've developed software that compares the financial statement trends of all public companies to each other -- and came to the same conclusion. SFM ranks number eleven out of all public companies in terms of strength of financial statement trend.
Pitnick profile picture
I like the stores and I like the stock. I think it's fairly valued now, and recently sold my Jan 22 $20 call options, but will be happy to buy back in on dips.
Hi @StockBros Research

Excellent article!

What do you think about EBIT and EBIT margin since 2016? Both values seem depressed.

farmed out profile picture
@StockBros Research Good article. Relatively speaking, it looks cheap to me, but a half-decent dividend would really help me get even more interested.

Any thoughts on that high amount of short interest? Looks like the possibility of a short squeeze if this stock took off.
StockBros Research profile picture
@farmed out my savings Thanks! The high amount of short interest definitely peaked our interest.

Any piece of good news can send SFM squeezing because of that, which adds to the number of viable reasons to buy the stock.

We don't know when it will squeeze exactly, but it's possible. Sometimes though, short squeezes can be fairly predictable in our opinion, which we wrote about in this post linked below in case you want to read about it.

How to Find and Predict a Short Squeeze: www.stockbrosresearch.com/...

Thanks again for reading!
BEErock24 profile picture
I'm very bearish on Sprouts! They are the BIGGEST masks Nazi store I know!!! Their share holders need to know thousands of ppl that refuse to wear masks, or can't cuz they have medical conditions.... They have STOPPED SHOPPING THERE!!!!
Joseph Webster profile picture
@BEErock24 Most grocery stores around here are "mask nazis". Guessing that'll go to the wayside as COVID cases eventually decline, but either way, not a huge reason to be bearish on SFM IMO
Pitnick profile picture
@BEErock24 Which medical conditions?
Thanks for this helpful article. I believe that the health and lifestyle customer (including folks who drink Celsius and shun other energy drinks) will provide a strong customer base. Expansion in some key US States should also be v supportive. Long $SFM.
StockBros Research profile picture
@Uli W Thanks for reading! Agreed
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