The Scotts Miracle-Gro Company
SMG
$65.04
-0.14%
The Scotts Miracle-Gro Company is the largest US purveyor of home lawn and gardening products, selling grass seed, fertilizer, and weed, animal, and disease control under well-recognized brands including Scotts, Miracle-Gro, Roundup, Ortho, and Tomcat, with over half of revenue typically flowing through Home Depot and Lowe's. Its competitive identity rests on dominant shelf-space ownership in the consumer lawn-and-garden category, a business that is highly seasonal and heavily dependent on North American weather and discretionary homeowner spending. The current investor narrative centers on the completed divestiture of the Hawthorne Gardening cannabis-lighting business to Vireo Growth, a strategic refocus on the core US consumer franchise, and a sharp post-earnings rally following the November 4 fiscal Q4 release. Debate now hinges on whether the company can stabilize top-line trends after a 21.8% YoY revenue decline in the September quarter and convert its seasonal cash generation into durable deleveraging and margin recovery.…
SMG
The Scotts Miracle-Gro Company
$65.04
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Investment Opinion: Should I buy SMG Today?
Rating: Hold with a constructive, accumulation-on-weakness bias. The core thesis is that SMG is a seasonal-trough earnings story trading at roughly 10.3x the sole analyst's FY EPS estimate of $6.27 ($64.71 price), while the trailing 28.0x PE reflects a depressed trailing base (EPS of just $0.036) rather than normalized spring-season economics — but the 21.8% Q4 revenue decline and negative equity mean the recovery is not yet proven. The constructive sell-side tilt (UBS upgrade to Buy on October 15, 2026; Wells Fargo Overweight and Stifel Buy reiterated November 5; JP Morgan Neutral) supports the view, though the absence of a formal consensus target and single-analyst coverage limits conviction.
Supporting evidence: (1) valuation — PS of 0.89x sits near the bottom of the historical 2.2x–11.9x band and price-to-FCF of ~7.8x ($341.5 million TTM FCF against a $2.91 billion market cap) is near the low end of history; (2) the core spring season grew — Q2 revenue of $1,459.5 million vs. $1,421.0 million and Q3 of $1,172.1 million vs. $1,188.0 million prior year, with Q2 gross margin of 41.83% and operating income of $411.3 million; (3) profitability is seasonal but real — trailing gross margin 32.32% and operating margin 12.37%, with Q3 generating $384.2 million of free cash flow; (4) the implied forward multiple of ~10.3x versus the 28.0x trailing PE implies the market expects a dramatic earnings normalization, and the tight 3% spread between the $6.19 low and $6.40 high EPS estimates signals conviction. Against this, the 5.32% dividend yield carries a 1.49 payout ratio (uncovered by trailing EPS), and debt-to-equity of -5.44 with only $7.4 million of period-end cash is a genuine constraint.
Key risks that would invalidate the thesis: a wet, cold spring delaying the peak season and a consumer trade-down to private label, which would cut the $6.27 EPS estimate and re-rate the multiple upward; a dividend cut to preserve liquidity amid negative equity; and the front-loaded nature of the 30.99% one-month rally (versus +2.86% over three months) leaving the stock vulnerable to profit-taking. This Hold would upgrade to Buy on evidence of positive US Consumer sell-through into the fiscal 2027 spring and gross margin recovery above 35% in Q2, or if the price pulls back toward the $54–$56 gap zone while estimates hold; it would downgrade to Sell if Q4-style revenue declines persist into Q1/Q2 or if the dividend is cut. Verdict: fairly valued to modestly undervalued on forward earnings and cash flow, but expensive on trailing metrics and balance-sheet quality — a show-me story rather than a clean value opportunity.
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SMG 12-Month Price Forecast
SMG presents a classic seasonal-trough recovery setup: the ~10.3x forward multiple and ~7.8x price-to-FCF are near historical lows, while the spring peak season held up year over year and the Hawthorne divestiture removes a drag. Against that, the 21.8% Q4 revenue decline, negative equity, and an uncovered dividend mean the recovery depends on execution in a single weather-sensitive season, and the 30.99% one-month rally has already priced much of the near-term good news. The constructive sell-side tilt (UBS Buy, Wells Fargo Overweight, Stifel Buy, JP Morgan Neutral) supports a neutral-to-positive stance, but single-analyst coverage and the absence of a consensus target cap conviction. I would upgrade to bullish on evidence of positive spring sell-through and gross margin above 35% in fiscal Q2, or on a pullback toward $54–$56 with estimates intact; I would downgrade to bearish if Q4-style declines persist into the spring quarters or the dividend is cut.
Wall Street consensus
Coverage is thin, with only one analyst contributing to the consensus estimate set, so a formal Buy/Hold/Sell distribution and average price target are not available from the provided data. The single analyst's estimates imply EPS of $6.27 (range $6.19–$6.40) and revenue of $3.74 billion (range $3.70–$3.80 billion), which at the current $64.71 price implies a forward PE of roughly 10.3x — a valuation that would represent meaningful upside if the estimate is achieved. Institutional ratings from the broader sell-side community lean constructive: UBS upgraded to Buy from Neutral on October 15, 2026, Wells Fargo has maintained Overweight through multiple updates (most recently November 5), Stifel has reiterated Buy, and JP Morgan remains Neutral, indicating a bullish tilt with one notable holdout.
The absence of a published consensus target price limits signal strength, but the pattern of ratings actions is informative: UBS's upgrade to Buy in mid-October preceded the sharp November rally, and the reiteration of Overweight and Buy ratings on November 5 — immediately after the Q4 release — suggests analysts are looking through the seasonal loss toward the fiscal 2027 spring season. The high end of the EPS estimate range ($6.40) would imply roughly 12% upside to earnings versus the $6.19 low end, a relatively tight 3% spread that signals stronger conviction in the earnings outlook than the single-analyst coverage count would suggest. The key risk to the bullish case is that the Q4 revenue decline of 21.8% proves structural rather than seasonal; if so, even the low-end estimate could prove optimistic, and the stock's 31% one-month rally would be vulnerable to a sharp reversal given the limited analyst cushion and the negative equity position.
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Bulls vs Bears: SMG Investment Factors
The bull case currently has the stronger evidence: the core spring season grew YoY (Q2 and Q3 revenue both above prior-year levels), free cash flow of $341.5 million supports a ~7.8x price-to-FCF, and the ~10.3x forward PE on the analyst's $6.27 EPS estimate implies substantial upside if the recovery materializes. The bear case rests on the 21.8% Q4 revenue decline, negative book equity, and a 1.49 payout ratio that leaves the 5.32% dividend uncovered by earnings. The single most important tension is whether the Q4 collapse is weather- and timing-related or a structural consumer pullback heading into the fiscal 2027 spring season — that one question determines whether the forward earnings estimate is achievable or optimistic. A secondary tension is the balance sheet: with negative equity and only $7.4 million of period-end cash, the company depends on seasonal working-capital swings and external financing to delever. Net, the risk/reward skews positive but is contingent on spring-season execution, and the 31% one-month rally means much of the near-term good news is already priced.
Bullish
- Forward PE of ~10.3x implies deep value: At $64.71, the sole analyst's FY EPS estimate of $6.27 (range $6.19–$6.40) implies a forward PE of roughly 10.3x, versus a trailing PE of 28.0x. That gap implies the market is pricing a seasonal-trough earnings base rather than the normalized spring-season run rate, and the tight 3% spread between the high and low EPS estimates signals conviction in the recovery.
- Spring peak season held up YoY: Q2 revenue of $1,459.5 million and Q3 revenue of $1,172.1 million both exceeded prior-year comparables of $1,421.0 million and $1,188.0 million, so the core spring season grew despite the headline Q4 decline. Q2 gross margin of 41.83% and operating income of $411.3 million show the franchise still earns strong peak-season economics.
- Analyst ratings lean constructive post-Q4: UBS upgraded to Buy from Neutral on October 15, 2026, ahead of the rally, and Wells Fargo (Overweight) and Stifel (Buy) reiterated on November 5, immediately after the Q4 release, with JP Morgan the lone Neutral. The pattern of ratings actions suggests the sell-side is looking through the seasonal loss toward fiscal 2027.
- Strong seasonal free cash flow: Trailing free cash flow is $341.5 million against a $2.91 billion market cap, a price-to-FCF of roughly 7.8x, near the low end of the historical range. Q3 alone generated $384.2 million of FCF, demonstrating the business converts peak-season sales into cash even while reporting GAAP losses in the off-season.
Bearish
- Q4 revenue collapsed 21.8% YoY: Fiscal Q4 revenue was $302.9 million, down 21.81% from $387.4 million, with gross profit turning negative at -$2.1 million versus +$23.5 million a year earlier. If this weakness is structural consumer pullback rather than weather/timing, even the low-end $6.19 EPS estimate could prove optimistic.
- Negative equity and extreme leverage optics: Debt-to-equity is reported at -5.44 because shareholders' equity is negative, the PB ratio is -7.82x, and ROE is -27.9%. Cash at period-end was only $7.4 million, so external financing flexibility — not internal cash alone — will determine financial risk over the next 12 months.
- Dividend exceeds earnings coverage: The 5.32% dividend yield comes with a payout ratio of 1.49, meaning the dividend is not covered by trailing earnings (EPS of just $0.036). The company is simultaneously repurchasing stock ($25.6 million in Q4), competing with deleveraging and adding balance-sheet risk.
- Rally is front-loaded and vulnerable: The 1-month gain of 30.99% dwarfs the 3-month change of 2.86% and 6-month change of 5.94%, a pattern of event-driven front-loading that is prone to profit-taking. The stock already pulled back 2.52% to $64.71 on the most recent session and sits only ~12% below the $73.47 July high, capping near-term upside.
SMG Technical Analysis
SMG is in a recovery uptrend that has turned decisively higher over the past year, with the stock up 14.55% over 12 months versus a 9.59% gain for SPY, a roughly 5-point relative-strength edge. At $64.71, the shares sit near the top of their 180-day range, approximately 34% above the September 28 closing low of $48.44 and only about 12% below the July 16 intraday-cycle closing high of $73.47, placing the stock in roughly the 88th percentile of its observed range. That positioning signals momentum leadership rather than deep value, though it also means the stock is no longer cheap on a mean-reversion basis after a violent move off the lows.
Short-term momentum is exceptionally strong and accelerating: the stock is up 30.99% over the past month against a 4.99% decline for SPY, a relative-strength spread of 35.98 points, while the 3-month change is a more modest 2.86% and the 6-month change 5.94%. This pattern — a flat-to-modest intermediate trend punctuated by a sharp one-month surge — points to an event-driven re-rating, consistent with the November 4 fiscal Q4 filing and the October 15 gap from roughly $49.72 to $54.25 followed by the November 2 jump to $65.13. The most recent session showed a 2.52% pullback to $64.71 on volume of about 1.0 million shares, a normal digestion of the spike rather than a breakdown, but the divergence between the 1-month (+31%) and 3-month (+2.9%) figures warns that near-term gains are front-loaded and vulnerable to profit-taking.
Key resistance sits at the $73.10–$73.47 area (the July 16 and July 28 closes), and a decisive breakout above that zone would confirm a new leg higher and likely target the prior cycle highs. Support is anchored at the $48.44 September low, with an intermediate shelf around $54–$56 where the October gap originated; a break below $54 would neutralize the bullish reversal and put the 52-week low back in play. The maximum drawdown of -34.07% over the period underscores meaningful downside volatility, and while beta is not provided, the stock's 31% one-month move against a -5% SPY month implies high sensitivity to idiosyncratic catalysts — position sizing should account for gap risk around earnings and weather-driven guidance updates.
Beta
—
—
Max Drawdown
-34.1%
Largest decline past year
52-Week Range
—
Price range past year
Annual Return
+12.3%
Cumulative gain past year
| Period | SMG Return | S&P 500 |
|---|---|---|
| 1m | +30.2% | -2.4% |
| 3m | +5.4% | -2.3% |
| 6m | +14.9% | +2.8% |
| 1y | +12.3% | +11.3% |
| ytd | +9.4% | +11.4% |
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SMG Fundamental Analysis
The revenue trajectory is deeply seasonal and currently contracting at the top line: fiscal Q4 (September 30, 2026) revenue was $302.9 million, down 21.81% YoY from $387.4 million, and gross profit turned negative at -$2.1 million versus +$23.5 million a year earlier. The full-year picture is more nuanced — Q2 revenue of $1,459.5 million and Q3 revenue of $1,172.1 million both exceeded their prior-year comparables of $1,421.0 million and $1,188.0 million, respectively, indicating that the spring peak season held up even as the seasonally weak Q4 deteriorated. Segment data show the US Consumer segment generating $1,032.9 million with other segments at $139.2 million, confirming that the core consumer franchise remains the engine while the divested Hawthorne business removes a drag. The investment case therefore hinges on whether the Q4 weakness is weather- and timing-related or signals a broader consumer pullback heading into the fiscal 2027 spring season.
Profitability is sharply seasonal and currently negative at the consolidated level: Q4 net income was -$121.9 million with an EPS of -$2.10, an operating margin of -47.2%, and a gross margin of -0.69%, reflecting fixed-cost absorption against a tiny revenue base. The trailing gross margin of 32.32% and operating margin of 12.37% mask wide quarterly swings — Q2 gross margin reached 41.83% and Q3 31.22%, versus 25.03% in Q1 — and the Q4 gross margin of -0.69% compares unfavorably to the prior-year Q4's 6.07%. Net margin on a trailing basis is a thin 3.16%, and ROE of -27.9% reflects a negative equity base rather than purely operating losses. The key question is whether peak-season margins can expand enough to offset the seasonal trough, and the Q2-to-Q3 gross margin compression from 41.8% to 31.2% suggests pricing and mix remain under pressure.
Balance-sheet quality is the central risk: debt-to-equity is reported at -5.44 due to negative shareholders' equity, the current ratio is 1.22, and cash at period-end was only $7.4 million against $177.8 million of Q4 operating cash flow and $146.3 million of free cash flow. Trailing free cash flow is $341.5 million, and the Q3 cash flow statement showed $345.6 million of operating cash flow and $384.2 million of free cash flow, demonstrating that the business can generate substantial seasonal cash even while reporting GAAP losses. However, the Q1 period consumed $370.4 million of operating cash and the company continues to pay a dividend (payout ratio 1.49, yield 5.32%) while repurchasing stock ($25.6 million in Q4), which competes with deleveraging. The negative equity position and reliance on seasonal working-capital swings mean external financing flexibility, not internal cash generation alone, will determine financial risk over the next 12 months.
Quarterly Revenue
$302900000.0B
2026-09
Revenue YoY Growth
-21.8%
YoY Comparison
Gross Margin
-0.7%
Latest Quarter
Free Cash Flow
$341500000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is SMG Overvalued?
Because trailing net income is positive (EPS of $0.036 and trailing net margin of 3.16%), the PE ratio is the appropriate primary metric, and SMG trades at a trailing PE of 27.99x. The forward PE of -0.97x is not meaningful as reported — it reflects a sign artifact in the data rather than a genuine negative earnings expectation, since the sole analyst's estimated EPS of $6.27 implies a forward multiple closer to 10.3x at the current $64.71 price. That gap between the ~28x trailing and ~10x forward multiple implies the market expects a dramatic earnings recovery, consistent with the seasonal trough in Q4 and a normalization of the spring season.
On peer comparison, SMG's PS ratio of 0.89x and EV/EBITDA of 10.76x sit at the low end of what a branded consumer-products franchise typically commands, while the trailing PE of 28.0x is elevated relative to the 12.4% operating margin and 3.2% net margin. The negative PB ratio of -7.82x is not comparable to industry averages because of negative book equity, and the PEG ratio of -0.97 is distorted by the sign of the earnings base. Relative to a Basic Materials/Agricultural Inputs peer set, the 0.89x sales multiple looks inexpensive, but that discount is arguably justified by the negative equity, the 5.32% dividend yield that exceeds earnings coverage (payout ratio 1.49), and the 21.8% Q4 revenue decline.
Historically, SMG's PS ratio has ranged from roughly 2.2x to 11.9x over the past several years, and the current 0.89x reading is near the bottom of that band — a level last approached during the 2022–2023 downturn. The trailing PE of 28.0x compares with historical readings that swung from negative to over 20x depending on the seasonal quarter, so the multiple is less informative than the sales and cash-flow metrics. The current price-to-free-cash-flow of roughly 7.8x (based on $341.5 million TTM FCF against a $2.91 billion market cap) is near the low end of the historical range and suggests the market is pricing in skepticism about the durability of cash generation rather than optimism.
PE
28.0x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 4x~9x
vs. Industry Avg
14.2x
Industry PE ~14.2x*
EV/EBITDA
10.8x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the balance sheet and seasonality. Debt-to-equity is -5.44 because shareholders' equity is negative, ROE is -27.9%, and period-end cash was only $7.4 million, leaving little buffer outside the spring cash cycle. Q4 gross margin of -0.69% versus +6.07% a year earlier shows how quickly fixed costs overwhelm a small revenue base, and the 21.8% Q4 revenue decline raises the risk that the seasonal trough deepens. The 5.32% dividend with a 1.49 payout ratio is not covered by trailing EPS of $0.036, and continued buybacks ($25.6 million in Q4) compete directly with deleveraging. Revenue concentration adds another layer: over half of sales flow through Home Depot and Lowe's, so a single retailer's inventory discipline or shelf-space reset could move the top line materially.
Market and competitive risks are dominated by valuation compression and event sensitivity. The trailing PE of 28.0x sits against a 12.4% operating margin and 3.2% net margin, so any disappointment in the spring season would likely compress the multiple toward the low end of its historical band; the PS ratio of 0.89x is already near the bottom of a 2.2x–11.9x historical range, suggesting the market is skeptical rather than euphoric. The stock's 31% one-month move against a -5% SPY month implies high idiosyncratic sensitivity, and the -34.07% max drawdown underscores gap risk around earnings and weather-driven guidance. Competitive pressure from private-label lawn care and alternative retail channels, plus regulatory scrutiny of certain herbicide chemistries, could erode the shelf-space moat that underpins the franchise.
The worst-case scenario is a wet, cold spring in the Northeast and Midwest that delays the peak season, combined with a consumer trade-down to private label, producing a second consecutive year of declining US Consumer revenue. In that chain, the analyst's $6.27 EPS estimate would be cut, the forward multiple would re-rate upward, and the stock could retest its September 28 low of $48.44 — roughly -25% from the current $64.71. A more severe outcome, where the dividend is cut to preserve liquidity amid negative equity, could push shares toward the lower end of the historical PS band, implying a decline of -30% to -35% and consistent with the -34.07% max drawdown already observed. Investors should size positions for a realistic -25% to -35% downside from current levels in an adverse spring.
FAQ
Ranked by severity: first, balance-sheet risk — debt-to-equity of -5.44 reflects negative shareholders' equity, period-end cash was only $7.4 million, and the 5.32% dividend carries a 1.49 payout ratio, so a dividend cut or equity raise is a live possibility. Second, earnings/seasonality risk — Q4 revenue fell 21.81% YoY to $302.9 million and gross margin turned negative at -0.69%, showing how quickly fixed costs overwhelm a small revenue base; a wet, cold spring in the Northeast and Midwest could cut the $6.27 EPS estimate. Third, concentration and competitive risk — over half of revenue flows through Home Depot and Lowe's, so a shelf-space reset or private-label trade-down would hit the top line directly. Fourth, valuation and momentum risk — the 30.99% one-month gain versus a -4.99% SPY month is front-loaded, and the -34.07% max drawdown shows the stock's gap risk around earnings and weather-driven guidance.
The scenario framework assigns a 50% probability to the base case of $62–$74, in which the spring season is roughly flat to modestly up, the $6.27 EPS estimate is broadly achieved, and the stock trades between the ~10.3x forward multiple at the low end and the July 16 high of $73.47 at the top. The bull case (30% probability, $78–$85) requires a favorable spring, Q2 revenue above the $1,459.5 million prior-year level, and gross margin recovering toward the 41.83% Q2 peak, driving a re-rating to 12–13x forward EPS. The bear case (20% probability, $48–$55) assumes a delayed spring and private-label trade-down produce a second year of declining US Consumer revenue, cutting estimates and retesting the $48.44 September low. The base case is most likely, and its key assumption is that Q4-style declines do not repeat in the spring quarters.
The answer depends on which earnings base you use. On trailing figures the stock looks expensive: the PE is 27.99x on EPS of just $0.036, with a thin 3.16% net margin and 12.37% operating margin. On forward earnings it looks cheap: the $6.27 EPS estimate implies ~10.3x, and the PS ratio of 0.89x sits near the bottom of a historical 2.2x–11.9x band, while price-to-FCF of ~7.8x and EV/EBITDA of 10.76x are modest for a branded consumer franchise. The negative PB of -7.82x is not meaningful because book equity is negative. The market is therefore pricing skepticism — that the Q4 collapse is structural and the dividend (5.32% yield, 1.49 payout ratio) is at risk — rather than optimism. If the spring season delivers, the forward multiple implies substantial re-rating potential; if not, the trailing multiple is the more honest signal.
The risk/reward is moderately favorable but conditional. At $64.71, the analyst's $6.27 EPS estimate implies a forward PE of roughly 10.3x, and price-to-FCF of ~7.8x on $341.5 million of trailing free cash flow is near the low end of history, so the upside if the spring season normalizes is meaningful. However, there is no published consensus price target (only one analyst contributes estimates), so the 'upside' is implied by the earnings estimate rather than an explicit target, and the 30.99% one-month rally has already captured much of the near-term good news. The biggest downside risk is a repeat of the Q4 pattern — revenue fell 21.81% YoY to $302.9 million with gross margin of -0.69% — which could send shares back toward the $48.44 September low, roughly -25%. It is a reasonable buy for patient, risk-tolerant investors who can tolerate a -25% to -35% drawdown and want exposure to a seasonal recovery, ideally accumulated on pullbacks toward the $54–$56 gap zone rather than after a 31% spike.
SMG is better suited to a medium-to-long-term holding period of at least 12–18 months than to short-term trading. The business is highly seasonal — Q2 revenue of $1,459.5 million and Q3 of $1,172.1 million dwarf Q4's $302.9 million — so earnings visibility is limited to the spring window and quarterly results swing from -$2.16 EPS in Q1 to $4.11 in Q2, making short-term positioning essentially a weather bet. The stock's volatility reinforces this: a -34.07% max drawdown, a 30.99% one-month rally, and a 35.98-point relative-strength spread versus SPY in a single month. The 5.32% dividend yield offers some compensation for waiting, but with a 1.49 payout ratio it should not be treated as a reliable income stream. A patient investor with a 12–18 month horizon can underwrite the fiscal 2027 spring season and potential deleveraging; a trader should recognize that the front-loaded move has already reduced near-term upside.