SFM: 3 Specialty Food Stocks Catering to Changing Consumer Tastes

In today’s world, consumer preferences are shifting as per the trends prevailing in the market. Premium, organic, and health-conscious products are the current trends in the food market. Companies in this sector cater to niche markets by offering innovative and high-quality food options that align with evolving dietary trends, such as plant-based diets, gluten-free alternatives, and functional foods.

Given the industry’s robust prospects, investors seeking an opportunity to invest could consider looking into fundamentally well-positioned specialty food stocks Sprouts Farmers Market, Inc. (SFM), Ingredion Incorporated (INGR), and Nomad Foods Limited (NOMD) for solid gains.

The demand for transparency in food sourcing and production has also propelled the growth of specialty food brands. Consumers are increasingly looking for products with clean labels, minimal processing, and ethically sourced ingredients.

Hence, companies are reformulating their products to remove artificial ingredients, hydrogenated oils, high-fructose corn syrup, and other additives commonly associated with processed foods and opting for organic and sustainably sourced ingredients to meet consumer expectations.

The global food and grocery retail market is anticipated to reach $14.78 trillion by 2030, exhibiting a CAGR of 3.2%. Also, the specialty food market is set to be worth $473.6 billion by 2029, growing at a CAGR of 12%. As consumer preferences continue to evolve, the food industry is well-positioned to capitalize on trends that prioritize health, sustainability, and innovation, making them attractive long-term investments.

Let’s explore the fundamental aspects of the aforementioned stocks in detail:

Sprouts Farmers Market, Inc. (SFM)

SFM is a specialty natural and organic food retailer offering perishable product categories and non-perishable product categories under the brand name Sprouts.

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On October 9, SFM announced the launch of a new exclusive line of more than 130 premium body care, personal care, and home fragrance items, Real Roots by Sprouts. This exclusive and curated line of premium will help its customers follow a healthy lifestyle and wellbeing.

In terms of the trailing-12-month ROCE, SFM’s 28.56% is 164.5% higher than the 10.80% industry average. Similarly, its 9.79% trailing-12-month ROTA is 147.7% higher than the industry average of 3.95%. Also, its trailing-12-month net income margin of 4.73% compares to the industry average of 4.26%.

In the fiscal third quarter that ended on September 29, 2024, SFM’s net sales increased 13.6% year-over-year and amounted to $1.94 billion. The company reported an adjusted gross profit of $740.92 million, indicating an 18.2% growth from the prior-year quarter, while its adjusted EBITDA grew 28.2% from the prior-year quarter to $158.58 million. Its attributable adjusted net income came in at $91.61 million, and its adjusted EPS was $0.91 per share, up 35.9% and 40% year-over-year, respectively.

Street expects SFM’s revenue for the fiscal fourth quarter (ended December 2024) to increase 15.1% year-over-year to $1.95 billion. Its EPS for the same period is expected to register a 47.3% growth from the prior year, settling at $0.72. In addition, it surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.

SFM shares have surged 201.8% over the past year and 124.2% over the past nine months to close the last trading session at $150.15.

SFM’s stance is apparent in its POWR Ratings. The stock has an A grade for Quality and a B for Growth. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 35 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #29. Click here to see the additional SFM ratings (Value, Momentum, Stability, and Sentiment).

Ingredion Incorporated (INGR)

INGR is a leading provider of ingredient solutions for food, beverage, and industrial applications that manufactures and sells sweeteners, starches, nutrition ingredients, and biomaterial solutions derived from wet milling and processing corn and other starch-based materials to a range of industries internationally.

On November 14, INGR announced a new long-term collaboration with Lantmännen, an agricultural cooperative and Northern Europe’s leading player in agriculture, bioenergy, food, and ingredients, to accelerate the development of high-quality plant-based proteins in the European market. This strategic partnership should help INGR to expand its global footprint in the European market.

The stock’s trailing-12-month net income margin of 9.05% is 112.5% higher than the industry average of 4.26%. Similarly, its 18.68% trailing-12-month ROCE is 73% above the industry average of 10.80%. Also, its trailing-12-month asset turnover ratio of 1.00x compares favorably to the industry average of 0.87x.

For the third quarter that ended on September 30, INGR’s net sales amounted to $1.87 billion. It posted a gross profit of $479 million, indicating a 13.8% increase from the prior-year quarter.

The company’s non-GAAP operating income grew 28.8% from the year-ago value to $282 million. In addition, INGR’s attributable non-GAAP net income came in at $203 million, up 30.1% year-over-year, while its non-GAAP earnings per share rose 30.9% from the year-ago value to $3.05.

The consensus revenue estimate of $1.96 billion for the fiscal first quarter (ending March 2025) represents a 4.2% increase year-over-year. The consensus EPS estimate of $2.59 for the same quarter indicates a 24.6% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has surged 24.9%, closing the last trading session at $136.58.

INGR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

INGR has a B grade for Value, Sentiment, and Quality. It is ranked first out of 75 stocks in the B-rated Food Makers industry. Click here to see the additional ratings for INGR (Growth, Momentum, and Stability).

Nomad Foods Limited (NOMD)

Based in Feltham, the United Kingdom, NOMD manufactures, markets, and distributes a range of frozen food products globally. The company offers frozen fish products, ready-to-cook meals, frozen poultry, and ice-creams. Its portfolio of brands includes Birds Eye, Findus, iglo, Ledo and Frikom.

On November 26, the company paid a quarterly dividend of $0.15 per share. NOMD pays an annual dividend of $0.60, which translates to a yield of 3.63% at the current share price. Also, its four-year average dividend yield is 0.49%.

NOMD’s trailing-12-month net income margin and EBIT margin of 6.53% and 13.89% are 53.5% and 41.4% higher than their respective industry averages of 4.26% and 9.82%.

During the fiscal third quarter, which ended on September 30, 2024, NOMD’s revenue increased marginally year-over-year, amounting to €769.6 million ($806.85 million). Its gross profit rose 14.5% from the same period last year to €248.2 million ($260.21 million).

The company posted an adjusted operating profit of €141.2 million ($148.03 million), indicating 21.2% growth from the prior year’s quarter. NOMD’s adjusted profit for the period stood at €89.3 million ($93.62 million), up 22% year-over-year, while its adjusted EPS grew 27.9% from the year-ago value to €0.55.

Analysts expect NOMD’s revenue and EPS for the fiscal year (ended December 2024) to be $3.19 billion and $1.79, respectively. For the fiscal year 2025, its revenue is expected to increase 3% year-over-year to $3.28 billion, while its EPS is forecasted to settle at $1.89, indicating a 5.5% improvement over the prior year.

The stock has gained 4.3% intraday and 3.9% over the past month to close the last trading session at $17.22.

NOMD’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has a B grade for Value and Stability. Within the Food Makers industry, it is ranked #22 out of 75 stocks. Click here to see NOMD’s ratings for Growth, Momentum, Sentiment, and Quality.

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SFM shares were trading at $154.16 per share on Tuesday afternoon, up $4.01 (+2.67%). Year-to-date, SFM has gained 21.32%, versus a 3.25% rise in the benchmark S&P 500 index during the same period.