Sprouts Farmers Market, Inc. SFM has been on a steady upward trajectory, fueled by strong consumer demand for fresh and organic groceries. Closing at $155.25 yesterday, shares of SFM have rallied 15.3% over the past three months, outpacing the industry’s growth of 3.3%. 
 

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Well, the recent rally might have pushed Sprouts Farmers’ valuation higher. SFM currently trades at a forward 12-month price-to-earnings (P/E) multiple of 32.24X, which positions it at a premium compared to the industry’s average of 20.13X and the S&P 500's 20.52X. The stock is also trading above its median P/E level of 29.57, observed over the past year. The valuation does suggest that Sprouts Farmers is overvalued.
 

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Let’s determine whether SFM stock is a smart buy at its current price or if waiting for a better entry point makes more sense.

Why Sprouts Farmers Stock Is Gaining Investor Attention

Capitalizing on its distinctive product assortment and relentless focus on customer needs, Sprouts Farmers has maintained steady growth despite facing stiff competition. Its commitment to offering fresh produce and health-oriented products aligns with the growing consumer demand for health-oriented food choices.

From plant-based alternatives to gluten-free snacks and keto-friendly options, Sprouts Farmers ensures its shelves are stocked with the most in-demand health-conscious offerings. The company’s focus on innovation within its private-label segment has bolstered consumer loyalty. The Sprouts-branded products accounted for 23% of total sales in the final quarter of 2024. Furthermore, the company expanded its assortment by launching 7,100 new items last year, including more than 300 Sprouts Brand offerings such as grass-fed meatballs, organic pasture-raised eggs and high-end beauty products.

To strengthen its footprint, Sprouts Farmers is aggressively expanding in high-growth regions. In 2024, the company inaugurated 33 new locations, entering Wyoming as its 24th state. Management anticipates opening at least 35 additional stores in 2025. With 110 approved sites and 70 executed leases, Sprouts Farmers is well-positioned for sustained expansion, particularly in the Midwest and Northeast.

Embracing a multi-channel approach, Sprouts Farmers continues to adapt to shifting consumer shopping habits. Significant investments in digital infrastructure, online ordering and delivery services have enhanced customer accessibility. Strategic collaborations with Uber Eats, DoorDash and Instacart have further strengthened its e-commerce presence. E-commerce sales surged 37% in the fourth quarter, accounting for 14.5% of total revenues.

SFM Sets an Upbeat Tone for 2025

Sprouts Farmers expects strong growth in 2025, with net sales projected to rise between 10.5% and 12.5% and comparable store sales increasing between 4.5% and 6.5%. Adjusted earnings before interest and taxes are anticipated to range from $590 million to $610 million, while adjusted earnings per share are expected to be between $4.52 and $4.68, a notable increase from $2.84 in 2024.

How Estimates Are Shaping Up for SFM

Reflecting the positive sentiment around Sprouts Farmers, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their estimates for the current and next fiscal years by 10 and 18 cents to $4.66 and $5.29 per share, respectively. These estimates indicate expected year-over-year growth rates of 24.3% and 13.6%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
 

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Is SFM Stock a Buy, Hold or Sell?

Sprouts Farmers remains a compelling investment, driven by its differentiated product offerings, strong brand positioning and expansion strategy. The company continues to benefit from growing consumer demand for health-focused products, private label innovation and digital transformation, reinforcing its competitive edge. While the stock trades at a premium, its solid execution, robust financial outlook and continued store expansion justify investor confidence. SFM currently carries a Zacks Rank #2 (Buy).

Don’t Miss These Solid Bets

United Natural Foods UNFI, which, together with its subsidiaries, distributes natural, organic, specialty, produce, and conventional grocery and non-food products in the United States and Canada, currently carries a Zacks Rank #2. UNFI has a trailing four-quarter earnings surprise of 408.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for United Natural Foods’ current financial year sales calls for growth of 1.9% from the year-ago reported numbers.

Farmer Bros. Co. FARM, a U.S.-based manufacturer and distributor of coffee, tea and culinary products, currently carries a Zacks Rank #2. FARM has a trailing four-quarter earnings surprise of 34.9%, on average. 

The Zacks Consensus Estimate for FARM’s current financial-year sales and bottom line suggests growth of 3.3% and 25%, respectively, from the year-ago reported numbers.

Utz Brands, Inc. UTZ, which manufactures a diverse portfolio of savory snacks, currently carries a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 8.8%, on average. 

The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings suggests growth of 1.2% and 10.4%, respectively, from the year-ago reported numbers.

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Farmer Brothers Company (FARM) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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