Yahoo Finance Why The Scotts Miracle-Gro Company (NYSE:SMG) Could Be Worth Watching
The Scotts Miracle-Gro Company (NYSE:SMG), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$203 at one point, and dropping to the lows of US$143. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Scotts Miracle-Gro's current trading price of US$143 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Scotts Miracle-Gro’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Scotts Miracle-Gro
What is Scotts Miracle-Gro worth?
Great news for investors – Scotts Miracle-Gro is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Scotts Miracle-Gro’s ratio of 14.06x is below its peer average of 22.61x, which indicates the stock is trading at a lower price compared to the Chemicals industry. However, given that Scotts Miracle-Gro’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Scotts Miracle-Gro?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 8.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Scotts Miracle-Gro, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since SMG is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on SMG for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SMG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for Scotts Miracle-Gro (1 is concerning) you should be familiar with.
If you are no longer interested in Scotts Miracle-Gro, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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