Which Is a Better Investment, Kroger Co or Sprouts Farmers Market Inc Stock? (2024)

Sifting through countless of stocks in the Food Retail & Distribution industry can be tedious, and sometimes two stocks are just too similar to judge which is the better investment. If you’re on the fence about investing in Sprouts Farmers Market Inc or Kroger Co because you’re not sure how they measure up, it’s important to compare them on a few factors before making your decision.

Read on to learn how Sprouts Farmers Market Inc and Kroger Co compare based on key financial metrics to determine which better meets your investment needs.

Sprouts Farmers Market, Inc. is a specialty natural and organic food retailer. The Company offers a specialty grocery experience featuring an open layout with fresh produce at the heart of the store. It offers products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. The Company curates its product mix to differentiate fresh, natural and organic foods and healthier options throughout all of its departments. It categorizes the varieties of products it sells as perishable and non-perishable. Its perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Its non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care. The Company operates approximately 407 stores in 23 states.

The Kroger Co. is a food and drug retailer. The Company operate supermarkets, multi-department stores and fulfillment centers throughout the United States. It operates approximately 2,722 supermarkets, 2,257 pharmacies and 1,665 fuel centers in 35 states and the District of Columbia while also operating online through a digital ecosystem to offer customers an omnichannel shopping experience. The Company also manufactures and processes food for sale by its supermarkets and online. It offers Pickup and Harris Teeter ExpressLane personalized, order online, pick up at the store services at 2,350 of its supermarkets and provide delivery, which allows it to offer digital solutions to substantially all of its customers. Its delivery solutions include orders delivered to customers from retail store locations, customer fulfillment centers powered by Ocado and orders placed through third-party platforms. The Company also offers customer-facing apps and interfaces.

As of August 7, 2024, Sprouts Farmers Market Inc had a $9.5 billion market capitalization, compared to the Food Retail & Distribution median of $1.5 million. Sprouts Farmers Market Inc’s stock is NA in 2024, NA in the previous five trading days and up 146.58% in the past year.

Currently, Sprouts Farmers Market Inc’s price-earnings ratio is 29.6. Sprouts Farmers Market Inc’s trailing 12-month revenue is $7.2 billion with a 4.5% net profit margin. Year-over-year quarterly sales growth most recently was 11.9%. Analysts expect adjusted earnings to reach $3.393 per share for the current fiscal year. Sprouts Farmers Market Inc does not currently pay a dividend.

Currently, Kroger Co’s price-earnings ratio is 18.4. Kroger Co’s trailing 12-month revenue is $150.1 billion with a 1.4% net profit margin. Year-over-year quarterly sales growth most recently was 0.2%. Analysts expect adjusted earnings to reach $4.444 per share for the current fiscal year. Kroger Co currently has a 2.4% dividend yield.

Stock evaluation requires access to huge amounts of data and the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movements. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors streamline and work through such data.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A‐F grades for each of five key investing factors: value, growth, momentum, earnings estimate revisions and quality. Here, we’ll take a closer look at Sprouts Farmers Market Inc and Kroger Co’s stock grades to see how they measure up against one another.

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The foundation of growth investing is seeking out stocks of companies exhibiting strong, consistent and prolonged growth that is expected to continue into the future.

In order to compute the growth score and assign it a letter grade, the percentile ranks for each of three components‐consistency of annual sales growth, five-year sales growth rankings adjusted for extreme levels, and consistency of positive annual cash from operations‐must be determined. These three rank figures are added together, and the sum is ranked against the entire stock universe to arrive at a company’s Growth Score to create an equal distribution of grades.

The companies in the bottom 20% of the stock universe receive Growth Grades of F, considered to be very weak, while those in the top 20% receive A grades, which are considered very strong.

Sprouts Farmers Market Inc has a Growth Score of 90, which is Very Strong. Kroger Co has a Growth Score of 89, which is Very Strong.

Looking at the Growth Grade breakdown above, both Sprouts Farmers Market Inc and Kroger Co have a grade of A. For investors who focus solely on a company’s upward growth, further research should be conducted into both companies’ other financial metrics before deciding whether to invest.

Like the Value Grade, AAII’s A+ Investor Quality Grade comes from the percentile rank of key metrics. Specifically, the Quality Score is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit relative to assets, buyback yield, change in total liabilities to assets, accruals, Z double prime bankruptcy risk (Z) score and the F-Score.

The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the remaining measures that are valid. To be assigned a Quality Score, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.

The Quality Score is used to assess the underlying “quality” of a particular stock. A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades over the period of 1998 through 2019.

Stocks receive better grades (higher scores) for having higher scores for the quality subcomponents and worse grades (lower scores) for lower scores for the subcomponents.

Sprouts Farmers Market Inc has a Quality Score of 95, which is Very Strong. Kroger Co has a Quality Score of 84, which is Very Strong.

Momentum grades help to uncover stocks experiencing anomalously high rates of return; research finds that stocks with high relative levels of momentum tend to outperform, whereas those with low levels of momentum tend to continue underperforming. Momentum is based on the price change of a stock over a specified period relative to all other stocks.

Typically, AAII looks at the weighted relative strength over the trailing four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters. The most recent quarterly price change is given a weight of 40% and each of the three previous quarters are given a weighting of 20%.

Sprouts Farmers Market Inc has a Momentum Score of 95, which is Very Strong. Kroger Co has a Momentum Score of 61, which is Strong.

Earnings estimate revisions scores take into account the magnitude of a company’s earnings surprise in its last two reported fiscal quarters. Often, surprises beget further surprises‐or at least continued sales growth (the exact opposite is generally true, too).

Successful stock investing involves buying low and selling high, so stock valuation is an important consideration for stock selection. Buying stocks that are going to go up typically means buying stocks that are undervalued in the first place, although momentum investors may argue that point.

These 2 key factors, when combined with the above, provide a holistic view into a particular stock. Further, by joining A+ Investor you can see whether Sprouts Farmers Market Inc and Kroger Co pass any of our 60+ stock screens that have outperformed the market since their creation.

Overall, Sprouts Farmers Market Inc stock has a Growth Score of 90, Momentum Score of 95 and Quality Score of 95.

Kroger Co stock has a Growth Score of 89, Momentum Score of 61 and Quality Score of 84.

Comparing Sprouts Farmers Market Inc and Kroger Co’s grades, scores and metrics can act as a solid basis to determine whether they may be a good investment or not. You’ll also want to look at your portfolio’s asset allocation as well as your risk tolerance and financial goals to see if either of these stocks would make a good fit for you. AAII can help you figure out which investments align with your individual needs and preferences.

Investors are encouraged to do their own due diligence and research. In this way, individuals can effectively become managers of their own assets‐without having to rely on others for financial independence. You can count on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis.

A+ Investor adds to our qualitative teaching with a powerful data suite to help you whittle down investment choices to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.