Sprouts Farmers Market: Terrific Growth Pace As This Grocer Builds Out More Compact Store Formats

Gary Alexander
31.2K Followers
(10min)

Summary

  • I'm initiating Sprouts Farmers Market with a buy rating. The company is experiencing rapid growth, with shares more than doubling year-to-date.
  • The company’s sales are surging, driven by new store openings and strong same-store sales growth, outperforming Street expectations.
  • The company is planning to build out new compact store formats, which are expected to be a further tailwind to margins.
  • Valuation is expensive at ~30x forward EPS and ~18x forward EBIT, but justified with the company's aggressive growth plans.

Exterior of Sprouts Farmers Market store with farm fresh produce sign on street

krblokhin

In the wake of Whole Foods’ ascension from upstart, farm-fresh grocer to national behemoth acquired by Amazon, one more company is following in its wake: Sprouts Farmers Market (NASDAQ:SFM). The Phoenix-based chain, which now has just over 400

This article was written by

31.2K Followers
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SFM either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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