Should You Buy or Hold Sprouts Farmers Stock at Its Current Price?

Sprouts Farmers Market, Inc. SFM has carved out a unique niche by tapping into the growing demand for fresh and organic groceries. This focused strategy has driven strong financial performance and set the company apart in a crowded market. However, with much of that success already priced into the stock, investors are wondering: Is there still value to unlock, or is it prudent to hold the stock at the current price?

SFM Stock Performance

Shares of SFM closed at $161.88 yesterday, marking a 27.4% gain year to date and outpacing the industry’s 15.8% growth. Sprouts Farmers has also outperformed peers such as Farmer Bros. Co. FARM, SpartanNash Company SPTN and Performance Food Group Company PFGC. While shares of Performance Food and SpartanNash have risen 3.7% and 2.2%, respectively, so far this year, Farmer Bros. has seen a decline of 12.2%.

Despite the recent rally, SFM still trades below its 52-week high of $182 reached on June 3, 2025.
 

Unlocking Sprouts Farmers’ Valuation

Well, the recent rally might have pushed Sprouts Farmers’ valuation higher. SFM currently trades at a forward 12-month price-to-sales (P/S) multiple of 1.72X, which positions it at a premium compared to the industry’s average of 0.26X. The stock is also trading above its median P/S level of 1.62, observed over the past year. 

This premium positioning is especially notable when compared to peers like Farmer Bros.  (with a forward 12-month P/S ratio of 0.10), SpartanNash Company (0.06) and Performance Food Group Company (0.21).
 

Decoding Potential Tailwinds Behind SFM’s Rally

Sprouts Farmers' commitment to providing fresh produce and health-oriented products aligns with the increasing consumer demand for healthier food options. The overall market for natural and organic food at home, which SFM targets, is estimated to be around $290 billion within the total $1.6 trillion spent on food at home. Its private-label products continue to gain traction, accounting for 24% of total sales, with 300 new items launched last year, fostering customer loyalty. The company reported net sales of $2.24 billion in the first quarter of 2025, with comparable store sales growth of 11.7%. 

To strengthen customer relationships, SFM has initiated the rollout of its new loyalty program, which is already showing positive signs. Piloted in 35 stores in late 2024, the program achieved sign-ups and scan rates above internal targets. A broader launch begins in the second half of 2025, starting in Arizona. Sprouts Farmers also began self-distributing fresh meat and seafood through its distribution centers. This move provides greater control, enhances freshness and optimizes existing supply-chain capacity. Roughly 80% of stores are now within 250 miles of a distribution center, leading to reduced total miles driven per store delivery by 7%.

Sprouts Farmers plans to open at least 35 new stores in 2025, targeting approximately 10%-unit growth, supported by a robust pipeline of 120 approved sites and more than 85 signed leases. The company's new small-box store format (23,000 sq ft) is designed for more efficient growth and de-risking expansion. New stores generate $13 million in first-year sales, growing 20-25% over the next four years, and achieving cash-on-cash returns in the low to mid-30% range by year five. The company sees "plenty of white space" for potential expansion to 1000-plus stores.

Embracing a multi-channel approach, Sprouts Farmers continues to adapt to shifting consumer shopping habits. Significant investments in digital infrastructure, online ordering and delivery services have enhanced customer accessibility. Strategic collaborations with Uber Eats, DoorDash and Instacart have further strengthened its e-commerce presence. E-commerce now accounts for 15% of total sales, growing 28% year over year in the first quarter of 2025.

SFM Sets an Upbeat Tone for 2025

Sprouts Farmers’ focus on health-conscious consumers is paying off, driving steady traffic and sales growth. With more than 70% of its products being attribute-driven, such as gluten-free, organic and vegan, the company effectively caters to this growing demographic. This supports SFM’s full-year 2025 guidance, which includes net sales growth of 12% to 14%, with comparable store sales growth of 5.5% to 7.5%.

How Estimates Are Shaping Up for SFM

Wall Street analysts have expressed confidence in Sprouts Farmers by raising their earnings estimates. Over the past 60 days, the Zacks Consensus Estimate for the current and next fiscal years has risen by 9% to $5.08 and 7.6% to $5.69 per share, respectively. The estimates suggest year-over-year increases of 35.5% and 12%, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
 

How to Play SFM Stock: Buy, Hold or Sell?

Sprouts Farmers remains a compelling investment, driven by its differentiated product offerings, strong brand positioning and expansion strategy. The company continues to benefit from growing consumer demand for health-focused products, private-label innovation and digital transformation, reinforcing its competitive edge. While the stock trades at a premium, its solid execution, robust financial outlook and continued store expansion justify investor confidence. SFM currently sports 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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