Sprouts Farmers Market (SFM:NAS) Fundamental Valuation Report


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Sprouts Farmers Market $25.09 (USD) Close Price as of 23/02/2018

Based on the analysis conducted in this report, Sprouts Farmers Market, (SFM:NAS) is found to be  Fairly valued to slightly Undervalued.

Company Sprouts Farmers Market
Symbol:Exchange SFM:NAS
Industry Consumer Defensive:Grocery Stores
Close Price/Date $25.09 (USD) 23/02/2018
Weighted Average Valuation $25.68 (USD)
Summary SFM:NAS is found to be  Fairly valued to slightly Undervalued by 2.3% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $28.80 (USD)
(in order of importance) Discounted Cash Flow: $23.56 (USD)
Comparables: $20.55 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Overvalued on a Comparable Valuation basis
Asset Basis: Fairly valued on an Asset Valuation basis

Valuation Details

Sprouts Farmers Market Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for SFM:NAS

Using a discounted cash flow model we generated an intrinsic value of $23.56 (USD) for SFM:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

SFM:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $23.56 1% 5% 1% 5%
WACC (or Ke) 8.17 $30.00 $19.21
Terminal Growth Rate 3.00 $19.60 $29.42
Tax Rate 0.23 $25.49 $21.63
Cash Flow 395,881,682 $21.54 $25.58
Capital Expenditures -144,188,600 $22.87 $24.25
Long Term Debt 329,845,000 $23.68 $23.43

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $20.55 (USD) for SFM:NAS. We also generated a valuation of $15.67 (USD) using other metrics and comparables.
The comparable companies were Casey’s General Stores (CASY:NAS) and Weis Markets (WMK:NYS)

Company SFM:NAS End Date Value
Earnings/Share $1.15 (USD)
Book Value/Share $4.88 (USD)
Sales/Share $33.83 (USD)
Cash Flow/Share $2.25 (USD)
EBITDA/Share $2.35 (USD)
Price Based on Comps Adjustment Factor (%)
$23.55 (USD) 80.7
$11.57 (USD) 0.0
$14.36 (USD) 0.0
$18.58 (USD) 0.0
$15.67 (USD) 0.0
SFM:NAS Ratios Used Average Values CASY:NAS WMK:NYS
21.82 PE Ratio 20.48 27.42 13.54
5.14 PB Ratio 2.37 3.65 1.10
0.74 PS Ratio 0.42 0.56 0.29
11.18 PCF Ratio 8.28 9.49 7.06
11.77 EV to EBITDA 8.17 10.42 5.93

Multiples

Using a multiples approach we generated a valuation of  $30.76 (USD) for SFM:NAS

Company SFM:NAS End Date Value
Earnings/Share $1.15 (USD)
Book Value/Share $4.88 (USD)
Sales/Share $33.83 (USD)
Cash Flow/Share $2.25 (USD)
EBITDA/Share $2.35 (USD)
Price Based on Comps Adjustment Factor
$32.21 (USD) 0
$24.57 (USD) 0
$32.81 (USD) 0
$34.57 (USD) 0
$29.66 (USD) 0
Ratios Ratio Average
PE Ratio 28.01
PB Ratio 5.03
PS Ratio 0.97
PCF Ratio 15.40
EV to EBITDA 12.64

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  SFM:NAS for the last 5 years was  5.03

We ran the Adjusted Book Value for  SFM:NAS and generated a book value of  $4.90 (USD)
By multiplying these we get an adjusted valuation of  $24.66 (USD)

Analyst Data

In the Stockcalc database there are 5 analysts that provide a valuation for SFM:NAS. The 5 analysts have a concensus valuation for SFM:NAS for 2018 of $28.80 (USD).

SFM:NAS Sprouts Farmers Market

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 1 0 4.1667 Outperform 2018-2-22

Current Price: not available

Analyst Consensus
USD Millions 2018 2019
Mean EPS 1.21 1.37
# EPS Analysts 6 4
Mean Revenue 5,095.10 5,706.90
# Revenue Analysts 4 4
Mean Target Price 28.80
Mean Cash Flow 2.05 2.24
Mean EBITDA 335.30 374.70
Mean Net Income 161.30 182.00
Mean Debt Outstanding -449.90 -342.60
Mean Tax Rate 22.10 24.75
Mean Growth Rate 15.25
Mean Capital Expenditure 166.80 175.50

Company Overview (SFM:NAS USD)

Price 25.09
Range 24.91 – 25.69
52 week 17.63 – 28.02
Open 25.63
Vol / Avg. 2.77M/1.92M
Mkt cap 3.34B
P/E 21.82
Div/yield 0.00/0.00
EPS 1.15
Shares 133.07M
Beta 0.72
Summary chart

Detailed Company Description

Sprouts Farmers Market Inc is US based company which operates as a specialty retailer of natural and organic food. It offers products including fresh produce, bulk foods, vitamins and supplements, bakery, and body care and natural household items.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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