Contrasting GNC Holdings (GNC) and Sprouts Farmers Market (SFM)

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

Insider & Institutional Ownership

87.2% of Sprouts Farmers Market shares are owned by institutional investors. Comparatively, 63.6% of GNC Holdings shares are owned by institutional investors. 2.6% of Sprouts Farmers Market shares are owned by insiders. Comparatively, 1.9% of GNC Holdings shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Sprouts Farmers Market and GNC Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Sprouts Farmers Market $4.05 billion 0.68 $124.30 million $0.97 21.44
GNC Holdings $2.54 billion 0.16 -$286.25 million ($5.46) -1.07

Sprouts Farmers Market has higher revenue and earnings than GNC Holdings. GNC Holdings 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Sprouts Farmers Market 3.01% 21.00% 9.02%
GNC Holdings -15.11% -133.37% 3.95%

Risk & Volatility

Sprouts Farmers Market has a beta of 0.54, suggesting that its share price is 46% less volatile than the S&P 500. Comparatively, GNC Holdings has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500.

Dividends

GNC Holdings pays an annual dividend of $0.20 per share and has a dividend yield of 3.4%. Sprouts Farmers Market does not pay a dividend. GNC Holdings pays out -3.7% of its earnings in the form of a dividend. GNC Holdings has raised its dividend for 4 consecutive years.

Analyst Recommendations

This is a summary of current ratings for Sprouts Farmers Market and GNC Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sprouts Farmers Market 1 9 10 0 2.45
GNC Holdings 5 2 0 0 1.29

Sprouts Farmers Market currently has a consensus price target of $24.50, suggesting a potential upside of 17.79%. GNC Holdings has a consensus price target of $7.58, suggesting a potential upside of 30.07%. Given GNC Holdings’ higher probable upside, analysts clearly believe GNC Holdings is more favorable than Sprouts Farmers Market.

Summary

Sprouts Farmers Market beats GNC Holdings on 12 of the 17 factors compared between the two stocks.

Sprouts Farmers Market Company Profile

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.

GNC Holdings Company Profile

GNC Holdings, Inc. is a specialty retailer of health, wellness and performance products, which include protein, performance supplements, weight management supplements, vitamins, herbs and greens, wellness supplements, health and beauty, food and drink and other general merchandise. The Company’s operations consist of purchasing raw materials, formulating and manufacturing products and selling the finished products. It operates in three segments: U.S. and Canada, International and Manufacturing/Wholesale. Its U.S. and Canada segment generates revenues primarily from sales of products to customers at its Company-owned stores in the United States, Canada and Puerto Rico, through its Websites, GNC.com and LuckyVitamin.com. Its International segment generates revenue primarily to its international franchisees. Its Manufacturing/Wholesale segment comprises its manufacturing operations in South Carolina and its wholesale partner relationships.

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