I initially scooped up shares of better-for-you, attribute-driven grocer Sprouts Farmers Market (NASDAQ: SFM) for around $35 in 2023, and thought I was well on my way to experiencing my next multibagger investment. And indeed, the stock quintupled in value over the next two years. However, since then, it has dropped by 55% from its peak.
I don’t tell this story as some “woe is me” tale, but rather to highlight that even the simplest of growth stocks — such as a grocer like Sprouts — will face major pullbacks at some point. More importantly, though, these sell-offs can often prove to be excellent buy-the-dip opportunities, provided the company’s underlying operations and growth prospects remain intact.
I believe that is the case for Sprouts Farmers Market.
The main reason I’m happy to keep adding to my winning position in Sprouts Farmers Market is the company’s unique array of offerings. Its items tend to be more health-focused than those found at chains like Kroger or Walmart, but more affordably priced than those sold at premium chains like Whole Foods.
Sprouts focuses on selling groceries with specific attributes that some customers are seeking — organic, responsibly sourced, locally sourced, kosher, vegan, non-GMO, gluten-free, and more. With this niche focus, Sprouts aims to offer a “farmers market” experience at scale.
Here are four key reasons why Sprouts Farmers Market looks like a no-brainer stock to buy on the dip.
With 464 stores across 24 states, Sprouts is steadily marching toward its goal of becoming a national chain. It added 37 stores in 2025 and hopes to return to 10% annualized growth in store count over the medium term.
With 140 new store locations already approved in its pipeline — and an impressive track record of growth — I’m not betting against the company.
Beyond its focus on growing its store count, Sprouts’ smaller-format stores have supported its strong profitability. Its margins soared even as the company delivered 10% annualized sales growth over the last decade.
At a conference earlier this year, Chief Executive Officer Jack Sinclair said he believed the chain could triple its store count to over 1,400 in the long term. Sprouts could be a steal at today’s price if it maintains this improving profitability while it grows.
In 2018, e-commerce sales only accounted for 1% of Sprouts’ revenue. This year, they made up 16% of it, and grew by 21% compared to 2024. That booming e-commerce business is vital for the company as it increases order frequency and basket size while improving the customer experience.
Meanwhile, Sprouts-branded items now account for about 25% of sales — a figure that has grown from 16% in 2021. These private-label offerings not only carry higher margins but also enable the company to develop product innovations inspired by its customers — and now, its Sprouts Rewards loyalty program members.
Launching over 7,000 new product ideas last year, Sprouts’ private-label offerings will complement its recently launched rewards program, which should further enhance the success of the new ideas it develops. This level of product development is unusual for a grocer, and could become a “secret weapon” of sorts for the company as it tailors its new product ideas to match what members of its rewards program are requesting.
Despite its positives, the company’s valuation remains discounted. The stock plummeted by more than 50% this year following slight earnings misses (but otherwise solid operational success), and now trades at just 17 times free cash flow (FCF) and 15 times earnings, though it grew sales by 13% this year.
Not only is this a great valuation for investors to buy the stock at, it’s also a great valuation for management to repurchase shares at — and it’s doing so hand over fist. Over the last decade, Sprouts has lowered its number of shares outstanding at 4.5% annualized rate, and it has nearly $1 billion left on its current buyback authorization. In a way, it’s a win-win for investors. If the stock continues to struggle, the buybacks will be an even better deal for the company. If the stock recovers, that’s great, too.
Sitting here in Iowa (where it’s a toasty 43 degrees as I write this), I look forward to seeing a Sprouts Farmers Market closer to me than Kansas City. That said, I’m curious (and slightly worried) to see how the company performs when it expands into colder climates. The chain’s policy has been to source much of its produce locally, but it will have to perform some logistical magic to support stores higher up in the Midwest and the Northeast. While Sprouts’ distribution centers typically serve a 250-mile radius, this may be tested in the wintertime.
Currently, roughly three-quarters of its stores are located in just five states: California, Arizona, Colorado, Texas, and Florida. Therefore, this expansion “problem” is probably a long way off, but it may be something to monitor. Ultimately, I look forward to Sprouts facing this challenge one day, and I believe it remains a no-brainer, steady-Eddie growth stock to buy on the dip.
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Josh Kohn-Lindquist has positions in Sprouts Farmers Market. The Motley Fool has positions in and recommends Sprouts Farmers Market. The Motley Fool recommends the following options: long January 2028 $75 calls on Sprouts Farmers Market and short January 2028 $85 calls on Sprouts Farmers Market. The Motley Fool has a disclosure policy.
ATLANTA, August 24, 2023 (Newswire.com)
– Just in time for summertime, life-long grill aficionado Courtney Rada is serving up a complete menu of ideas to wow guests for any occasion. The host of “Carnivorous” shares a few timely tips for a classic burger with a twist, steaks, kabobs or something more adventurous. Courtney says anyone can create memorable mouthwatering delicacies on the grill.
SIMPLE SECRET FOR SUCCESS
Look no further than this secret ingredient, peanuts and peanut butter. It is a great way to take coleslaw up a notch like we did here with this Asian Peanut Slaw. For the grill, try this Grilled Peanut Butter burger. Just spread peanut butter right on top, even add chicken if preferred, then add lettuce, bacon, grape jelly, and a couple of slices of fresh jalapeno. The sweet creaminess of the peanut butter and jelly mixed with the kick from the jalapenos is delicious. Round it off with a little Saltine Peanut Brittle. Peanuts are always a hit at parties and everyone will love adding peanuts and peanut butter to a lot of dishes. For more information, visit peanutbutterlovers.com
TASTY BACKYARD BEVERAGE
Mix up the beverage offerings with a brand-new flavor from Stella Rosa. The new Stella Rosa Wines’ Pineapple and Chili. Yes, Chili. This wine strikes the perfect balance between sweet and spicy. Grill with a glass of Stella Rosa Pineapple and Chili in your hand for a refreshing drink that is cool but with an added touch of heat. Just pour over ice or mix with tequila for the ultimate spicy margarita. Stella Rosa Pineapple and Chili is sure to both cool down and heat up that backyard barbecue. For more information, visit stellarosawines.com
MUST HAVE ITEMS FOR THE GRILL
Always have options ranging from meat, chicken or seafood, and for this, a go-to is Sprouts Farmers Market. Their meat and seafood department offers all-natural, never-frozen, 100% Angus steaks that are pasture-raised without added hormones or antibiotics. Their seafood is 100% responsibly sourced and their chicken is always fresh. The knowledgeable butchers at Sprouts are always helpful and ready to assist with questions and cooking tips. They offer a fresh and friendly take on grocery shopping. For more information, visit www.sprouts.com
