Sprouts Farmers Market (NASDAQ:SFM) stock performs better than its underlying earnings growth over last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. To wit, the Sprouts Farmers Market, Inc. (NASDAQ:SFM) share price has soared 643% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 46% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. It really delights us to see such great share price performance for investors.

The past week has proven to be lucrative for Sprouts Farmers Market investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Sprouts Farmers Market

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Sprouts Farmers Market achieved compound earnings per share (EPS) growth of 27% per year. This EPS growth is lower than the 49% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Sprouts Farmers Market has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

It's nice to see that Sprouts Farmers Market shareholders have received a total shareholder return of 250% over the last year. That gain is better than the annual TSR over five years, which is 49%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Sprouts Farmers Market .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.