Piper Jaffray analyst, Sean Naughton, isn't chasing shares of Sprouts Farmers Market (NASDAQ: SFM). Despite strong results and a positive outlook, the valuation is keeping him on the sidelines. No change to Neutral rating but the PT rises to $30 on a stable earnings multiple.

Q4 was an impressive quarter for Sprouts with comps up 7.4% compared to consensus expectations of 5.7% growth. This marked a 110bp acceleration on the two-year trend. Traffic accounted for roughly 70% of the comp growth (or 5 percentage points), accelerating 100bp on the two-year trend. While the extra week and deflation in certain food categories did benefit gross margin.

Deflation in protein categories is likely putting downward pressure on sales and the potential for limited produce supply from the wet West Coast weather, makes caution with the outlook for next year understandable. That said, the midpoint of guidance for Q1 and FY16 assumes a deceleration in the two-year comp trend of 600 and 500bp. With traffic accelerating for three quarters straight and up 5% in Q4, visible trends remain strong and there is room for upside to numbers.

Despite the strong fundamentals, multiple expansion much beyond 28x forward numbers will be a challenge in the current environment. Our price target moves from $24 to $30 based on 25x (unchanged) FY17E EPS (was FY16E EPS).

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Shares of Sprouts Farmers Market closed at $27.43 yesterday.