Sprouts Farmers Market
Sprouts Farmers Market
IBD Stock Analysis
- Jumps past 26.61 handle buy point in heavy volume
- Earnings growth has rebounded as coronavirus fuels eat-at-home trend
- Rival grocer Kroger also cleared a buy point Tuesday
Industry Group Ranking
* Not real-time data. All data shown was captured at 12:37PM EDT on 07/21/2020.
Sprouts Farmers Market (SFM) is the IBD Stock of the Day as the natural foods retailer breaks out ahead of earnings next week. Grocery stocks including Sprouts stock, Kroger (KR) and new IPO Grocery Outlet (GO) have been acting well as the coronavirus pandemic lockdowns spur an eat-at-home shift. Kroger stock also staged a breakout Tuesday.
Sprouts Farmers Market shares gained a fresh lease on life in 2020 on an earnings comeback.
After three straight quarters of declines, the Arizona-based company has posted double-digit EPS gains in the latest two quarters.
The IBD Retail-supermarkets/minimarkets group ranks a middling No. 69 out of 197 groups tracked. However, SFM stock is the No. 1 stock in this group, with Kroger stock at No. 3. Sprouts stock belongs in the IBD 50 and in IBD Leaderboard, a curated list of leading stocks that stand out on technical and fundamental metrics. Kroger stock also is on the IBD 50 list of top growth stocks.
Sprouts Stock Technical Analysis
Sprouts stock surged 7.15% to 27.41 in Tuesday’s stock market trading, the highest price since late 2018 and clearing a 26.61 double-bottom handle buy point. The pattern also could be viewed as a cup-with-handle base, but the entry would be the same.
Volume was more than double normal trading, signaling institutional buying.
The relative strength line topped the consolidation peak as Sprouts stock broke out, a bullish technical signal, according to MarketSmith chart analysis. The RS line, measuring a stock’s performance against the S&P 500, is rising within a longer term downtrend. It is the blue line in the chart shown.
SFM stock holds a Relative Strength Rating of 88 out of a possible 99. The best stocks own ratings above 80.
The Composite Rating is a 96. That means Sprouts is outperforming 96% of all stocks in terms of overall fundamental and technical strength.
According to IBD Stock Checkup, Sprouts earns an Accumulation/Distribution Rating of B+. The A/D rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock, with B signifying moderate buying.
Meanwhile, Kroger stock rose 1.9% to 34.79 to break past a 34.60 cup-with-handle buy point, but off intraday peaks of 35.58. The handle in Kroger’s pattern is longer than normal, so that part of the consolidation could be regarded as a flat base on its own merits. Once again, the KR stock buy point would be the same.
Sprouts: Gluten-Free, Keto-Friendly
Sprouts focuses on fresh, natural and organic products, including an expansive range of bulk foods. The company boasts its plant-based, gluten-free, keto-friendly, and grass-fed offerings “meet the growing and diverse needs of today’s consumer.”
The grocer operates over 340 stores in 23 states. Sprouts struggled to grow its share price after doubling in its first day of trading after its 2013 IPO.
Sprouts Earnings And Fundamental Analysis
In May, Sprouts earnings easily beat views for the first quarter as revenue grew 16% to $1.6 billion. “The COVID-19 crisis led to a significant increase in sales as consumers bought more food to consume at home,” said CEO Jack Sinclair.
Amid the ongoing pandemic, Wall Street expects Sprouts earnings per share to increase 27% in Q2 when the grocer reports on July 29, and to jump 35% for 2020 as a whole. The Street sees Sprouts earnings per share declining nearly 8% in 2021 to $1.56.
Sprouts earnings growth averaged 15% over the last three quarters, just above the three-year EPS growth rate of 14%. The recent earnings acceleration contributes to a solid EPS Rating of 95 out of 99.
Sales growth averaged 11% over the past three quarters, in line with the three-year average.
Find Aparna Narayanan on Twitter at @IBD_ANarayanan.
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