Financial Comparison: Sprouts Farmers Market (NASDAQ:SFM) & Farmer Brothers (NASDAQ:FARM)

Farmer Brothers (NASDAQ:FARM) and Sprouts Farmers Market (NASDAQ:SFM) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, earnings, analyst recommendations, valuation, dividends, risk and profitability.

Volatility & Risk

Farmer Brothers has a beta of 1.6, suggesting that its stock price is 60% more volatile than the S&P 500. Comparatively, Sprouts Farmers Market has a beta of 0.78, suggesting that its stock price is 22% less volatile than the S&P 500.

Insider and Institutional Ownership

64.5% of Farmer Brothers shares are held by institutional investors. 4.6% of Farmer Brothers shares are held by company insiders. Comparatively, 1.1% of Sprouts Farmers Market shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmer Brothers	-4.20%	-26.00%	-6.06%
Sprouts Farmers Market	5.77%	36.53%	13.15%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Farmer Brothers and Sprouts Farmers Market, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmer Brothers	0	0	1	0	3.00
Sprouts Farmers Market	0	7	8	0	2.53

Farmer Brothers presently has a consensus target price of $4.50, indicating a potential upside of 169.46%. Sprouts Farmers Market has a consensus target price of $171.8667, indicating a potential upside of 14.01%. Given Farmer Brothers’ stronger consensus rating and higher possible upside, research analysts plainly believe Farmer Brothers is more favorable than Sprouts Farmers Market.

Earnings & Valuation

This table compares Farmer Brothers and Sprouts Farmers Market”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmer Brothers	$341.09 million	0.11	-$3.88 million	($0.68)	-2.46
Sprouts Farmers Market	$7.72 billion	1.91	$380.60 million	$4.86	31.02

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

Summary

Sprouts Farmers Market beats Farmer Brothers on 9 of the 14 factors compared between the two stocks.

About Farmer Brothers

Farmer Bros. Co. engages in the roasting, wholesale, equipment servicing, and distribution of coffee, tea, and other allied products in the United States. The company offers roast and ground coffee; frozen liquid coffee; flavoured and unflavoured iced and hot teas; culinary products, including spices, pancake and biscuit mixes, gravy and sauce mixes, soup bases, dressings, and syrups and sauces, as well as coffee filters, cups, sugar, and creamers; and other beverages comprising cappuccino, cocoa, granitas, and other blender-based beverages and concentrated and ready-to-drink cold brew and iced coffee. It also engage installation, repair, and refurbishment services for an array of coffee, tea, and juice equipment. The company serves small independent restaurants, foodservice operators, and large institutional buyers and national account customers. The company distributes its products through direct-store-delivery network, and common carriers or third-party distributors, as well as website. The company was founded in 1912 and is headquartered in Northlake, Texas.

About Sprouts Farmers Market

Sprouts Farmers Market, Inc., together with its subsidiaries, engages in the retailing of fresh, natural, and organic food products under the Sprouts brand in the United States. It offers perishable product categories, including fresh produce, meat and meat alternatives, seafood, deli, bakery, floral, and dairy and dairy alternatives; and non-perishable product categories, such as grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care. Sprouts Farmers Market, Inc. was founded in 1943 and is headquartered in Phoenix, Arizona.