Contrasting US Foods (NYSE:USFD) and Sprouts Farmers Market (SFM)

Sprouts Farmers Market (NASDAQ: SFM) and US Foods (NYSE:USFD) are both mid-cap non-cyclical consumer goods & services companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, dividends, valuation, profitability, institutional ownership, risk and analyst recommendations.

Profitability

This table compares Sprouts Farmers Market and US Foods’ 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%
US Foods 1.11% 12.64% 3.61%

Institutional & Insider Ownership

89.7% of Sprouts Farmers Market shares are owned by institutional investors. Comparatively, 96.9% of US Foods shares are owned by institutional investors. 2.6% of Sprouts Farmers Market shares are owned by company insiders. Comparatively, 1.6% of US Foods shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Sprouts Farmers Market and US Foods, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sprouts Farmers Market 2 8 11 0 2.43
US Foods 0 3 6 0 2.67

Sprouts Farmers Market currently has a consensus target price of $25.00, indicating a potential upside of 0.56%. US Foods has a consensus target price of $31.75, indicating a potential downside of 1.09%. Given Sprouts Farmers Market’s higher probable upside, research analysts plainly believe Sprouts Farmers Market is more favorable than US Foods.

Valuation & Earnings

This table compares Sprouts Farmers Market and US Foods’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sprouts Farmers Market $4.05 billion 0.82 $124.30 million $0.97 25.63
US Foods $22.92 billion 0.31 $209.79 million $1.17 27.44

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

Summary

Sprouts Farmers Market beats US Foods on 7 of the 13 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.

US Foods Company Profile

US Foods Holding Corp. is a holding company. The Company is a foodservice distributor in the United States. The Company, through US Foods, Inc. (USF), markets and primarily distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States. These customers include independently owned single and multi-unit restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations. As of December 31, 2016, the Company provided approximately 400,000 fresh, frozen, and dry food stock-keeping units (SKUs), as well as non-food items, sourced from over 5,000 suppliers. As of January 31, 2017, it maintained 75 primary operating facilities, consisting of its 60 distribution centers and other supporting facilities.

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