WMK - Sprouts Farmers Market Vs. Weis Markets: A Pair Trading Strategy With 20%+ Upside
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Illustration by Andriy Blokhin
Investment Thesis
I'm looking at Sprouts Farmers Market (SFM) compared to Weis Markets (WMK) because these two grocery companies show significant diversion in their relative valuations. Based on my analysis, WMK lags significantly behind SFM by many financial measures. SFM has a much higher return on invested capital, net operating profits less adjusted taxes (NOPLAT) margin, sales and NOPLAT per square foot and inventory turnover. Moreover, while SFM showed above-average comparable