The firm said it initiated coverage on the specialty retailer of natural and organic foods as it believes the company will be able to average 33% earnings growth during the next five years.
The stock closed at $31.29 on Thursday.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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 a number of negative factors, 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, premium valuation and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SFM has underperformed the S&P 500 Index, declining 22.74% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The gross profit margin for SPROUTS FARMERS MARKET is currently extremely low, coming in at 12.64%. Regardless of SFM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SFM's net profit margin of 4.05% compares favorably to the industry average.
- SFM's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- When compared to other companies in the Food & Staples Retailing industry and the overall market, SPROUTS FARMERS MARKET's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: SFM Ratings Report