NEW YORK (TheStreet) -- Shares of Sprouts Farmers Market Inc (SFM) are slipping, down 5.02% to $29.89 in morning trading Tuesday, after the grocery store chain announced the launch of a public offering of 15 million shares of its common stock held by affiliates of Apollo Global Management, LLC.
UBS Securities LLC, the sole underwriter for the offering, will have the option to purchase up to an additional 2.25 million shares of common stock from the selling stockholders.
The Phoenix, AZ-headquartered company said it will not issue shares in the offering and will not receive any proceeds from the sale of the shares by Apollo in this offering.
Sprouts Farmers Market is a healthy grocery store offering products such as fresh produce, bulk foods, vitamins and supplements, and packaged groceries catering to consumers' with growing interest in health and wellness, operating more than 190 stores in 10 states.
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'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 34.89%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- The gross profit margin for SPROUTS FARMERS MARKET is currently lower than what is desirable, coming in at 31.88%. 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 4.05% is above that of 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