Sprouts Farmers Market, Inc.

“Sprouts offers an attractive mix of niche differentiation, strong free cash flow, disciplined capital allocation, and a still-credible reinvestment runway. It is not an exceptional or hard-to-disrupt franchise, because grocery remains intensely competitive and customer switching costs are low, but it does appear to earn above-average returns with below-average permanent impairment risk. At the current valuation, investors are paying a reasonable price for a good operator rather than an inflated price for a perfect story, which supports a favorable long-term risk/reward.”