Is Sprouts Farmers Stock Still a Good Investment After 21% YTD Gains?

Sprouts Farmers Market Inc. SFM has been one of the top performers in the grocery space, posting a 20.7% year-to-date gain. The company continues to benefit from shifting consumer preferences toward healthier food choices, backed by solid fundamentals and evolving strategic initiatives. However, with the stock already on a strong upward trajectory, investors are now faced with a key question — does SFM still offer upside, or is it time to lock in gains?

SFM has comfortably outpaced the Zacks Food-Natural Foods Products industry’s rise of 9.7%. Sprouts Farmers’ unmatched scale and operational capabilities have also helped it outperform the broader Retail and Wholesale sector and the S&P 500 index, which posted respective declines of 1.4% and 4.1%.

SFM Stock YTD Performance

Sprouts Farmers has even outperformed its peers such as Farmer Bros. Co. FARM, SpartanNash Company SPTN and Performance Food Group Company PFGC. While shares of Farmer Bros. and SpartanNash have risen 13.8% and 12.2%, respectively, so far in the year, shares of Performance Food have declined 10.1%.

Closing yesterday’s trading session at $153.28, shares of Sprouts Farmers are currently trading below its 52-week high of $178.99 attained on Feb. 18, 2025. Technical indicators are supportive of Sprouts Farmers’ strong performance. The stock is trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability.

SFM Stock Trades Above 50-Day Moving Average

Decoding Potential Tailwinds Behind SFM’s Rally

Sprouts Farmers has steadily grown its presence in the natural and organic grocery segment by aligning its offerings with evolving consumer trends. Its focus on fresh produce and better-for-you products continues to resonate with health-conscious shoppers seeking clean-label and sustainable options.

The company's shelves reflect a curated mix of modern dietary preferences — from plant-based and gluten-free to keto-friendly alternatives — ensuring broader consumer appeal. Sprouts Farmers' expanding private label line has been a key growth driver. Notably, Sprouts-branded products contributed 23% of total sales in the final quarter of 2024. The company also introduced more than 7,000 new products last year, including more than 300 items under its house brand, such as grass-fed meatballs, organic pasture-raised eggs and premium beauty products.

Sprouts Farmers is actively pursuing store expansion, targeting areas with high growth potential. The company opened 33 new stores in 2024, expanding into Wyoming as its 24th state. Management expects at least 35 new stores in 2025. With 110 approved new locations and 70 executed leases, Sprouts Farmers is well-positioned for long-term geographic expansion, particularly in the Midwest and Northeast.

On the digitization front, the company has invested heavily in its e-commerce infrastructure and forged partnerships with Uber Eats, DoorDash, and Instacart to extend its digital reach. The fourth quarter witnessed a remarkable 37% surge in e-commerce sales, constituting 14.5% of total sales. The company's e-commerce business surpassed $1 billion in sales in 2024.

Sprouts Farmers Sets Bullish Tone for 2025

Sprouts Farmers expects strong growth in 2025, with net sales projected to rise between 10.5% and 12.5% and comparable store sales increasing between 4.5% and 6.5%. Adjusted earnings before interest and taxes are anticipated to be in the range of $590 million to $610 million, while adjusted earnings per share are expected between $4.52 and $4.68, a notable increase from $2.84 in 2024.

Here’s How Estimates Stack Up for SFM

Reflecting the positive sentiment around Sprouts Farmers, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their estimates for the current and next fiscal years by 10 and 18 cents to $4.66 and $5.29 per share, respectively. These estimates indicate expected year-over-year growth rates of 24.3% and 13.6%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Is the Premium Valuation Justified for SFM Stock?

Sprouts Farmers is currently trading at a premium. However, this elevated valuation is not without merit. With a forward 12-month price-to-sales ratio of 1.69, which surpassed the median level of 1.39 observed in the past year, Sprouts Farmers demonstrates its appeal to investors seeking growth opportunities. Moreover, when compared with the industry's forward 12-month P/S ratio of 0.25, Sprouts Farmers’ higher valuation reflects its position as a standout performer in the market.

This premium positioning is especially notable when compared to peers like Farmer Bros.  (with a forward 12-month P/S ratio of 0.12), SpartanNash Company (0.07) and Performance Food Group Company (0.18).

SFM Stock: Buy the Rally or Wait for a Pullback?

Sprouts Farmers has emerged as a standout performer in the grocery space, driven by robust consumer demand for healthier food options and supported by strong operational capabilities. The company’s store expansion, growing private label mix and bullish guidance reflect solid momentum ahead. SFM trades below its recent 52-week high but maintains strong technical indicators. Therefore, the stock's premium valuation underscores its growth potential. SFM's strategic expansions and optimistic 2025 outlook position it favorably, making it a compelling investment option. SFM currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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