Trade-Ideas LLC identified

Sprouts Farmers Market

(

SFM

) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sprouts Farmers Market as such a stock due to the following factors:

  • SFM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $58.2 million.
  • SFM has traded 140,599 shares today.
  • SFM traded in a range 244.3% of the normal price range with a price range of $2.75.
  • SFM traded below its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on SFM:

Sprouts Farmers Market, Inc. operates as a specialty retailer of fresh, natural, and organic food in the United States. SFM has a PE ratio of 32. Currently there are 9 analysts that rate Sprouts Farmers Market a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Sprouts Farmers Market has been 2.5 million shares per day over the past 30 days. Sprouts Farmers Market has a market cap of $3.8 billion and is part of the services sector and retail industry. Shares are down 6.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Sprouts Farmers Market as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, premium valuation, poor profit margins and disappointing return on equity.

Highlights from the ratings report include:

  • SFM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.84%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SFM is still more expensive than most of the other companies in its industry.
  • The gross profit margin for SPROUTS FARMERS MARKET is currently lower than what is desirable, coming in at 30.93%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 3.54% is above that of the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market on the basis of return on equity, SPROUTS FARMERS MARKET has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SFM's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.

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