After a tremendous run, Sprouts Farmers Market is climbing again after a pullback and the stock now offers a new buying opportunity for investors.
Sprouts stock is Thursday's pick for Investor's Business Daily's IBD 50 Growth Stocks To Watch as the natural foods market sits in a cup base. But astute investors may have spotted an early entry.
The IBD 50 stock ranks No. 1 out of 11 stocks in the Retail-Supermarkets/Mini Markets industry group, which holds a weak No. 136 out of 197 groups IBD tracks.
Sprouts Farmers Market opened its first store in 2002 and has grown to more than 380 outlets in 24 U.S. states, with a focus on fresh, organic foods.
The Arizona-based retail chain offers fresh meats, deli, dairy, frozen and bulk foods, supplements, baked goods and alcohol.
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Sprouts Stock In Early Buy Zone
Sprouts stock is in a third-stage cup base with an official 155.64 buy point, according to MarketSurge pattern recognition. The entry is the stock's all-time high set on Nov. 29.
The stock pulled back to create the base and has been climbing back. It pierced a downward trendline, offering an early entry around 142 up to around 149. It also retook its 50-day moving average Tuesday around that same 142 level.
Shares have gained around 123% since Sprouts staged a flat-base breakout at 65.53 in April. Sprouts stock hugged its 10-week moving average on the way up, without a severe violation until the week of Dec. 20. Shares reclaimed the closely watched line this week.
The stock holds a robust 97 IBD Relative Strength Rating.
Sprouts Farmers Market Shows Accelerating Profit Growth
Sprouts beat third-quarter adjusted earnings and sales estimates on Oct. 30. It also gave fourth-quarter and full-year 2024 adjusted profit guidance above views.
Its third-quarter earnings growth accelerated to 40% from 14% and 32% in the prior two quarters. Projections show profits rising 46% in the fourth quarter before averaging 14% over the following three quarters.
Sales growth also ticked up to 14% in the third quarter, improving from 9% and 12% in the prior two quarters. Forecasts show a 15% lift in fourth-quarter sales, then an average of around 11% over the following three periods.
Double-Digit Profit Growth
Full-year 2024 profit estimates call for a 30% increase after a 19% rise in 2023, then a 14% lift in 2025.
The natural foods retail stock holds a 13 out 99 possible Earnings Stability factor — with a lower number being superior — indicating steady earnings over the last three years. In addition, its Earnings Per Share Rating is a hearty 97 and its Composite Rating is 95. An ideal score for those latter two metrics is 99.
Sprouts is set to announce its fourth-quarter results on Feb. 20.
Mutual funds own 68% of shares, with 939 funds owning Sprouts stock in December, up from 917 in September.
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