The retail industry is undergoing a significant transformation driven by evolving consumer preferences, advancements in technology, and shifting market trends. E-commerce has taken center stage, propelled by the rapid integration of digital tools, the growth of mobile shopping, and changes in how consumers engage with brands and make purchasing decisions.
In addition, the changing dietary preferences and culinary trends are impacting the demand for specific food products, spurring the adoption of food and grocery retail. The integration of data analytics and automation improves operational efficiency and customer engagement in this ever-changing industry, enabling this market space to grow at a CAGR of 4% from 2024 to 2031.
Against this backdrop, let’s compare two grocery platform stocks to analyze which stock is better: Weis Markets, Inc. (WMK) and Sprouts Farmers Market, Inc. (SFM).
The Case for Weis Markets, Inc. Stock
With a $1.97 billion market cap, Weis Markets, Inc. (WMK) engages in the retail sale of food through a chain of supermarkets in Pennsylvania and surrounding states. The company's retail food stores sell groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, and general merchandise items.
WMK’s stock has gained 13.8% over the past three months to close the last trading session at $73.07.
WMK’s 2.38x trailing-12-month asset turnover ratio is 173.4% higher than the 0.87x industry average. Also, its 4.63% trailing-12-month Return on Total Assets is 20.1% higher than the 3.85% industry average.
WMK’s net sales for the third quarter, which ended on September 28, 2024, increased 2.2% year-over-year to $1.19 billion. In addition, the company’s non-GAAP net income was $25.84 million, or $0.96 per share, up 11.3% and 11.6% from the prior year’s quarter, respectively.
WMK’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality, Stability, and Value. WMK is ranked #7 out of 36 stocks in the A-rated Grocery/Big Box Retailers industry.
In addition to the POWR Ratings I’ve just highlighted, you can see WMK’s ratings for Growth, Momentum, and Sentiment here.
The Case for Sprouts Farmers Market, Inc. Stock
Valued at $15.09 billion by market cap, Sprouts Farmers Market, Inc. (SFM) engages in the retailing of fresh, natural, and organic food products under the Sprouts brand in the United States. It offers perishable and non-perishable product categories.
Shares of SFM have surged 138.1% over the past nine months to close the last trading session at $150.92.
In terms of the trailing-12-month gross profit margin, SFM’s 38% is 5% higher than the 36.2% industry average. However, its 6.34% trailing-12-month EBIT margin is 35.3% lower than the 9.79% industry average.
SFM’s net sales increased 14% year-over-year to $1.95 billion for the fiscal 2024 third quarter that ended September 29, 2024. Its income from operations grew 39.7% from the year-ago value to $122.45 billion. Moreover, the company’s net income and EPS came in at $91.62 million and $0.91, growing 40.3% and 42.2% from the prior year’s quarter, respectively.
For the fourth quarter ending December 2024, SFM’s revenue is expected to increase 15.1% year-over-year to $1.95 billion. Its EPS for the ongoing quarter is expected to be $0.72, increasing 47.3% from the prior year’s period. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
SFM’s fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.
SFM has a C grade for Sentiment and Stability. It is ranked #27 in the same industry.
Click here for the additional POWR Ratings for SFM (Value, Stability, Sentiment, and Momentum).
Weis Markets (WMK) vs. Sprouts Farmers Market (SFM): Which Grocery Stock Is a Better Buy?
The seamless integration of e-commerce platforms into the food and grocery retail sector has significantly boosted accessibility and convenience for consumers. Moreover, growing consumer awareness about health and wellness has led to a surge in demand for organic, natural, and health-conscious food products.
Leading grocery companies WMK and SFM stand to capitalize on the optimistic industry outlook. However, WMK’s strong financial performance and solid profitability might make it the better grocery stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Grocery/Big Box Retailers industry here.
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SFM shares were trading at $150.04 per share on Tuesday afternoon, down $0.88 (-0.58%). Year-to-date, SFM has gained 211.87%, versus a 28.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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