NEW YORK (TheStreet) -- Sprouts Farmers Market (SFM) - Get Sprouts Farmers Markets, Inc. Report stock is up by 3.01% to $20.18 in mid-morning trading on Tuesday, after receiving a rating upgrade to "buy" from "hold" at Deutsche Bank.
The firm also increased its price target to $24 from $20 on the stock.
Deutsche Bank listed several reasons why it believes Sprouts stock will regain momentum, including "overblown" fears that the company will be unable to compete against its peers and the company's traffic remaining best-in-class.
Also, Sprouts Farmers Market's valuation is "very attractive" compared to its return on investment capital and its peers, and the company is mostly protected from a global economic slowdown since its business would likely benefit from a loss of confidence from middle class consumers, Deutsche Bank said in an analyst note.
Sprouts Farmers Market is a food retailer based in Phoenix, Ariz.
Separately, TheStreet Ratings team rates SPROUTS FARMERS MARKET as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate SPROUTS FARMERS MARKET (SFM) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 29.27%, which is also worse than the performance of the S&P 500 Index. 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.
- Net operating cash flow has decreased to $52.86 million or 14.22% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SPROUTS FARMERS MARKET has marginally lower results.
- The gross profit margin for SPROUTS FARMERS MARKET is currently lower than what is desirable, coming in at 31.10%. 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 3.47% is above that of the industry average.
- The current debt-to-equity ratio, 0.37, 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 0.52, displays a potential problem in covering short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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.
- You can view the full analysis from the report here: SFM Ratings Report