The Scotts Miracle-Gro Company (NYSE:SMG), which is in the chemicals business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Scotts Miracle-Gro’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Scotts Miracle-Gro still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 18.44x is trading slightly below its industry peers’ ratio of 18.82x, which means if you buy Scotts Miracle-Gro today, you’d be paying a fair price for it. And if you believe that Scotts Miracle-Gro should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Scotts Miracle-Gro’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Scotts Miracle-Gro look like?
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. With profit expected to grow by a double-digit 12% in the upcoming year, the short-term outlook is positive for Scotts Miracle-Gro. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SMG’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SMG? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SMG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SMG, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Scotts Miracle-Gro. You can find everything you need to know about Scotts Miracle-Gro in the latest infographic research report. If you are no longer interested in Scotts Miracle-Gro, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.