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Are Investors Undervaluing Sprouts Farmers (SFM) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is Sprouts Farmers (SFM). SFM is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock has a Forward P/E ratio of 15.01. This compares to its industry's average Forward P/E of 15.66. SFM's Forward P/E has been as high as 17.93 and as low as 10.28, with a median of 15.76, all within the past year.

We also note that SFM holds a PEG ratio of 1.62. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SFM's industry currently sports an average PEG of 1.72. Over the last 12 months, SFM's PEG has been as high as 4.78 and as low as 1.49, with a median of 2.21.

Finally, investors should note that SFM has a P/CF ratio of 7.24. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 8.44. Over the past year, SFM's P/CF has been as high as 7.95 and as low as 4.44, with a median of 7.02.

These are just a handful of the figures considered in Sprouts Farmers's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that SFM is an impressive value stock right now.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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