Sprouts Farmers Market (SFM) versus Herbalife (HLF) Critical Survey

Sprouts Farmers Market (NASDAQ: SFM) and Herbalife (NYSE:HLF) are both mid-cap retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, earnings, analyst recommendations, dividends, institutional ownership and profitability.

Profitability

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This table compares Sprouts Farmers Market and Herbalife’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sprouts Farmers Market 3.40% 21.81% 9.07%
Herbalife 4.83% 457.78% 12.12%

Insider & Institutional Ownership

92.3% of Sprouts Farmers Market shares are held by institutional investors. Comparatively, 99.5% of Herbalife shares are held by institutional investors. 2.6% of Sprouts Farmers Market shares are held by insiders. Comparatively, 6.2% of Herbalife shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

Sprouts Farmers Market has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500. Comparatively, Herbalife has a beta of 1.2, meaning that its share price is 20% more volatile than the S&P 500.

Earnings & Valuation

This table compares Sprouts Farmers Market and Herbalife’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sprouts Farmers Market $4.66 billion 0.66 $158.44 million $1.14 20.32
Herbalife $4.43 billion 1.93 $213.90 million $2.38 41.13

Herbalife has lower revenue, but higher earnings than Sprouts Farmers Market. Sprouts Farmers Market is trading at a lower price-to-earnings ratio than Herbalife, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and target prices for Sprouts Farmers Market and Herbalife, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sprouts Farmers Market 1 7 12 0 2.55
Herbalife 0 1 4 0 2.80

Sprouts Farmers Market presently has a consensus price target of $27.13, suggesting a potential upside of 17.07%. Herbalife has a consensus price target of $103.75, suggesting a potential upside of 5.98%. Given Sprouts Farmers Market’s higher possible upside, analysts clearly believe Sprouts Farmers Market is more favorable than Herbalife.

Summary

Herbalife beats Sprouts Farmers Market on 11 of the 14 factors compared between the two stocks.

About Sprouts Farmers Market

Sprouts Farmers Market, Inc. is a food retailer. The Company operates as a grocery store that offers fresh, natural and organic food that includes fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, body care and natural household items catering to consumers’ interest in health and wellness. As of February 23, 2017, the Company operated 256 stores in 14 states. The Company categorizes the varieties of products it sells as perishable and non-perishable. The perishable product categories include produce, meat, seafood, deli and bakery. Its non-perishable product categories include grocery, vitamins and supplements, bulk items, dairy and dairy alternatives, frozen foods, beer and wine, and natural health and body care.

About Herbalife

Herbalife Ltd. is a global nutrition company. The Company develops and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, as well as personal care products. Its operating segments are based on geographical operations in six regions: North America; Mexico; South and Central America; Europe, the Middle East, and Africa (EMEA); Asia Pacific, and China. The Company categorizes its products into five groups: weight management, targeted nutrition, energy, sports and fitness, outer nutrition, and literature, promotional and other. As of December 31, 2016, it marketed and sold approximately 140 products encompassing over 4,700 stock keeping units (SKUs) globally. Its product categories include meal replacement; protein shakes; drink mixes; dietary and nutritional supplements containing herbs, vitamins, minerals and other natural ingredients; facial skin care; body care; hair care products; sales tools, and educational materials.

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