The Scotts Miracle-Gro Company
SMG
$54.57
+0.59%
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 through well-known 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 control and brand equity in a mature, seasonally cyclical consumer category, historically supplemented by the Hawthorne hydroponics segment. The investor narrative has pivoted sharply around the April 2026 divestiture of Hawthorne Gardening to Vireo Growth, a strategic refocus on the higher-margin core consumer business that removes a major drag on profitability and simplifies the equity story. Attention now centers on whether management can convert that simplification into durable margin recovery and debt reduction, against a backdrop of roughly flat top-line growth, a heavily levered balance sheet, and a dividend that consumes more than 100% of earnings.…
SMG
The Scotts Miracle-Gro Company
$54.57
Related headlines
Investment Opinion: Should I buy SMG Today?
Rating: Hold. The core thesis is that SMG is a leveraged, mature consumer-products company undergoing a simplification story (Hawthorne divestiture) that could unlock margin recovery, but the evidence of that recovery is not yet visible in the financials. The analyst consensus is 'buy' with an average target of $72.83, implying +33.5% upside, but the wide target range ($60-$82) and thin coverage (6 analysts) suggest low conviction. Given the negative equity and dividend coverage risk, a Hold is prudent until there is clearer evidence of sustainable earnings improvement.
Supporting evidence: The forward PE of 11.61x is cheap relative to the trailing PE of 22.60x, but the trailing PE is distorted by near-zero earnings. Revenue is declining (-1.34% YoY), gross margin is 31.22% (down from 31.82%), and the dividend payout ratio is 106.3%, which is unsustainable without cash flow growth. On the positive side, free cash flow of $326.4M provides a 10.2% FCF yield, and the PS ratio of 0.96x is near the low end of its historical range. The stock trades at a discount to the sector on forward earnings, but that discount is justified by negative book equity and revenue stagnation.
Risks and conditions: The biggest risks are a dividend cut, continued revenue decline, and failure to reduce debt. The rating would upgrade to Buy if forward EPS estimates are met (i.e., $6.27) and gross margins expand above 35%, or if the dividend is covered by earnings (payout ratio below 80%). It would downgrade to Sell if revenue declines accelerate beyond -5% or if the dividend is cut. Valuation verdict: fairly valued to slightly undervalued on forward earnings, but the risk profile warrants caution; the stock is not a compelling buy until the balance sheet and margin trends improve.
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SMG 12-Month Price Forecast
The risk/reward is balanced: the stock is cheap on forward earnings and offers significant upside to analyst targets, but the balance sheet is weak and the dividend is at risk. The Hawthorne divestiture is a positive step, but the market needs to see tangible margin improvement and debt reduction before re-rating the stock. I would upgrade to bullish if Q4 results show gross margin above 35% and revenue stabilization, and downgrade to bearish if the dividend is cut or revenue declines accelerate.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on The Scotts Miracle-Gro Company's 12-month outlook, with a consensus price target around $72.83 and implied upside of +33.5% versus the current price.
Average Target
$72.83
0 analysts
Implied Upside
+33.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$60 - $82
Analyst target range
Six analysts cover SMG with a consensus recommendation of "buy" (mean rating of 1.625 on a 1-to-5 scale where lower is more bullish), and an average target price of $72.83 — implying roughly +33.5% upside from the current $54.57. The consensus leans bullish, but the composition is telling: recent actions show Stifel reiterating Buy on September 29, 2026, Wells Fargo maintaining Overweight on July 30, 2026, and UBS holding Neutral, while JP Morgan downgraded from Overweight to Neutral on March 26, 2026 — a pattern of steady bullish conviction offset by at least one high-profile capitulation. The consensus EPS estimate of $6.27 on average revenue of $3.74 billion implies analysts expect a meaningful earnings rebound from the current $0.044 trailing EPS, which is the crux of the bull case.
The target range of $60.00 to $82.00 is wide — a 37% spread between low and high — signaling meaningful disagreement about the pace of the post-Hawthorne recovery. The $82 high target likely assumes successful margin expansion toward the high-30s gross margin range, debt paydown from Hawthorne proceeds, and a re-rating toward the mid-teens forward PE; the $60 low target, which still sits 10% above the current price, prices in continued revenue stagnation, margin compression, and a leveraged balance sheet that limits capital returns. Notably, even the low target implies upside, suggesting the selloff to $54.57 has overshot fundamental value — but with only six analysts, a 5.02 short ratio, and a beta of 1.85, conviction is thin and the stock remains prone to sharp, headline-driven moves in either direction.
Bulls vs Bears: SMG Investment Factors
The bear case currently has stronger evidence: negative equity, a dividend exceeding earnings, revenue decline, and a deeply negative technical trend outweigh the bull case's reliance on an uncertain margin recovery. The most important tension is whether the post-Hawthorne core business can deliver the earnings rebound implied by the $6.27 consensus EPS estimate; if it does, the 11.6x forward PE is cheap, but if revenue stagnation persists, the stock could retest its 52-week low. The recent bounce from $47.90 looks like an oversold snap rather than a trend reversal, and the high beta amplifies downside in any market pullback. Until there is concrete evidence of margin expansion and debt reduction, the risk/reward remains skewed to the downside despite the large analyst upside.
Bullish
- Deep discount to analyst targets: The consensus average target price is $72.83, implying +33.5% upside from $54.57, and even the lowest analyst target of $60.00 sits 10% above the current price. With a 'buy' consensus rating (mean 1.625), the selloff appears overdone relative to Street expectations.
- Forward PE of 11.6x prices recovery: The forward PE of 11.61x is less than half the trailing PE of 22.60x, reflecting analyst EPS estimates of $6.27 versus trailing EPS of just $0.044. This massive gap implies the market expects earnings to roughly double as Hawthorne losses disappear and margins normalize.
- Hawthorne divestiture removes drag: The April 2026 sale of Hawthorne Gardening to Vireo Growth eliminates a segment that was a disproportionate source of losses, leaving a core US Consumer business that generated 88% of Q3 2026 revenue ($1.033B of $1.172B). This simplifies the equity story and should improve consolidated margins.
- Strong free cash flow and high yield: Trailing free cash flow is $326.4M, a 10.2% FCF yield on the $3.28B market cap, and the dividend yield is 4.70%. Even with a 106% payout ratio, the cash generation provides flexibility for debt reduction and supports the dividend.
Bearish
- Negative equity and leveraged balance sheet: Shareholders' equity is negative, evidenced by ROE of -40.62%, debt-to-equity of -6.66, and price-to-book of -9.18. This limits financial flexibility and makes the company dependent on refinancing and working-capital management.
- Dividend not covered by earnings: The payout ratio is 106.3%, meaning the 4.70% dividend yield consumes more than 100% of earnings. With seasonal cash flow swings (from -$390.4M in the December quarter to +$384.2M in the June quarter), the dividend is at risk if cash flow deteriorates.
- Revenue stagnation and margin compression: Q3 2026 revenue declined -1.34% year-over-year to $1.172B, and gross margin compressed to 31.22% from 31.82%. Trailing gross margin of 30.59% is well below the 38-42% peak years of 2021-2022, showing limited pricing power.
- Severe relative weakness and high beta: SMG has lagged SPY by -25.81 percentage points over three months and -20.11 points year-to-date, with a beta of 1.85. The stock is down -23.12% over three months and sits only 14% above its 52-week low, indicating persistent distribution.
SMG Technical Analysis
SMG is in a sustained, multi-quarter downtrend despite a positive 1-year return of +11.87%, a divergence explained by the fact that the stock peaked near $75.34 in the spring and has since given back most of that advance. At $54.57, the stock sits at roughly 24% of its 52-week range ($47.90 low to $75.34 high), meaning it is trading in the lower quartile of its annual band and only about 14% above its 52-week low — a positioning that signals persistent distribution pressure rather than momentum, and one that leaves the stock vulnerable to a retest of the lows absent a catalyst. The 1-year gain is essentially a stale artifact of the April highs; the prevailing trend is clearly down.
Short-term momentum is decisively negative and worsening relative to the longer-term trend: the stock is down -23.12% over three months, -17.37% over six months, and -8.18% year-to-date, with the 1-month change of -0.40% masking a violent September slide from the mid-$60s to a $48.44 low on September 28. That 1-month/1-year divergence — a positive annual return against a deeply negative quarterly trend — is classic mean-reversion failure: the market is repricing the stock lower rather than buying the dip, and the recent two-session bounce from $49.72 to $54.57 (+9.8% in two days) looks like an oversold snap rather than a trend reversal. Relative strength confirms the weakness, with SMG lagging SPY by -25.81 percentage points over three months and -20.11 points year-to-date, while the 5.02 short ratio and 1.85 beta suggest elevated short interest and amplified downside participation in any risk-off move.
Key technical levels are well defined: support sits at the $47.90 52-week low, with the September 28 close of $48.44 marking the practical floor, while resistance is the $75.34 52-week high, with intermediate supply likely in the $62–$68 zone where the stock repeatedly failed in July and August. A decisive break below $47.90 would signal a fresh leg lower and likely trigger momentum-driven selling, whereas reclaiming the $62 area would be the first evidence of a genuine trend change. With a beta of 1.85 — roughly 85% more volatile than the S&P 500 — position sizing must account for the fact that a 10% market drawdown could translate into an 18%+ move in SMG, and the -34.07% max drawdown over the period underscores that this is a high-risk vehicle for any tactical exposure.
Beta
1.85
1.85x market volatility
Max Drawdown
-34.1%
Largest decline past year
52-Week Range
$48-$75
Price range past year
Annual Return
+1.2%
Cumulative gain past year
| Period | SMG Return | S&P 500 |
|---|---|---|
| 1m | -0.4% | +0.2% |
| 3m | -23.1% | +2.9% |
| 6m | -17.4% | +8.4% |
| 1y | +1.2% | +14.9% |
| ytd | -8.2% | +11.9% |
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SMG Fundamental Analysis
Revenue is stagnating rather than growing: fiscal Q3 2026 (quarter ended June 27, 2026) revenue was $1.172 billion, down -1.34% year-over-year from $1.188 billion, and the sequential pattern shows the classic seasonal arc — $354.4 million in the December quarter, $1.460 billion in the March quarter, and $1.172 billion in the June quarter — with the year-over-year comparison slightly negative at the seasonal peak. The segment mix is overwhelmingly concentrated in US Consumer at $1.033 billion of the $1.172 billion total (88%), with Other Segments contributing just $139.2 million, meaning the Hawthorne divestiture removes a small revenue line but a disproportionately large source of losses. The flat-to-declining top line implies the investment case cannot rest on growth; it must rest on margin recovery and cash generation, and the -1.34% YoY print suggests pricing and volume are not yet offsetting category softness.
Profitability is highly seasonal and improving at the operating line but still fragile at the net level: Q3 2026 net income was $112.2 million on a 9.57% net margin, down from $149.1 million and a 12.55% net margin in the prior-year quarter, while gross margin compressed to 31.22% from 31.82%. The March 2026 quarter was far stronger — $238.6 million of net income on a 41.83% gross margin and 16.35% net margin — showing that the spring selling season carries the year, while the December quarter produced a -$125.0 million loss and a 25.03% gross margin. Trailing gross margin of 30.59% and operating margin of 10.51% are respectable for a branded consumer-products company but well below the 38–42% gross margins SMG posted in its 2021–2022 peak years, and the trailing EPS of just $0.044 reflects how thin full-year profitability has become after seasonal losses.
Balance-sheet health is the central risk: shareholders' equity is negative, evidenced by ROE of -40.62%, a debt-to-equity ratio of -6.66, and a price-to-book of -9.18, all artifacts of accumulated losses against a leveraged capital structure. Liquidity is adequate but not comfortable, with a current ratio of 1.27, and the company generated $326.4 million of trailing free cash flow — a healthy 10.2% FCF yield on the $3.28 billion market cap — but that cash is largely committed: the 4.70% dividend yield implies roughly $154 million of annual payouts against a payout ratio of 106.3%, meaning the dividend is not covered by earnings and depends on cash flow that swings violently by quarter (from -$390.4 million in the December quarter to +$384.2 million in the June quarter). ROA of 9.29% is solid, but with negative book equity and a dividend exceeding earnings, the company has limited internal funding capacity and remains dependent on refinancing and working-capital management.
Quarterly Revenue
$1.2B
2026-06
Revenue YoY Growth
-1.3%
YoY Comparison
Gross Margin
31.2%
Latest Quarter
Free Cash Flow
$326399999.0B
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 but de minimis (EPS of $0.044), the trailing PE of 22.60x is economically meaningless and distorted by a near-zero denominator; the appropriate primary metric is the forward PE of 11.61x, which reflects the analyst consensus EPS estimate of $6.27 and is the multiple the market is actually paying for normalized earnings power. The enormous gap between the 22.60x trailing and 11.61x forward multiple implies the market expects earnings to roughly double, consistent with a post-Hawthorne margin recovery and the seasonal swing from a loss-making December quarter to a profitable spring. On EV/EBITDA of 13.22x and EV/Sales of 1.61x, the stock is not optically cheap on an enterprise basis, and the 0.96x PS ratio is the most favorable data point, suggesting the equity is priced for modest recovery rather than optimism.
Peer comparison is constrained by the absence of a supplied industry-average multiple set, but the internal spread is informative: a forward PE of 11.61x against a trailing PE of 22.60x represents a 49% discount of forward to trailing earnings, a gap that is unusually wide and signals either high confidence in the recovery or a market that does not yet believe it. Relative to the broader Basic Materials sector, where mid-teens forward multiples are typical for branded consumer-chemical franchises, SMG's 11.61x forward PE screens at a discount, but that discount is arguably justified by negative book equity, a 106% payout ratio, and revenue that is shrinking -1.34% year-over-year. The 13.22x EV/EBITDA is less forgiving and suggests the equity cheapness is partly an artifact of leverage rather than genuine value.
Historical context reinforces caution: SMG's own PE history is erratic because of recurring losses, ranging from 3.62x in March 2025 to 22.60x today, while its PS ratio has ranged from 2.22x to 11.90x over the past several years and now sits at 0.96x — near the bottom of its historical band. That low PS multiple can be read two ways: as a value opportunity if margins normalize, or as the market correctly discounting structural deterioration in a mature, retailer-dependent category. The 4.70% dividend yield, near the high end of the stock's historical range, similarly signals distress pricing rather than generous income, and the negative PEG ratio of -0.044 confirms that earnings-based growth metrics are unusable until profitability stabilizes.
PE
22.6x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 4x~9x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
13.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are acute: shareholders' equity is negative (ROE -40.62%, debt-to-equity -6.66), and the 4.70% dividend yield carries a 106.3% payout ratio, meaning the dividend is not covered by earnings. Free cash flow of $326.4M is healthy but highly seasonal, swinging from -$390.4M in the December quarter to +$384.2M in the June quarter, which creates refinancing and liquidity risk. Revenue concentration is extreme, with over half of sales from Home Depot and Lowe's, and the core US Consumer segment accounts for 88% of revenue, leaving little diversification. Additionally, the Q3 2026 net margin fell to 9.57% from 12.55% a year earlier, and trailing EPS of $0.044 shows how thin profitability has become.
Market and competitive risks include valuation compression if the recovery disappoints: the forward PE of 11.61x is a discount to the sector, but the EV/EBITDA of 13.22x is less forgiving and reflects leverage. The stock's beta of 1.85 means it is 85% more volatile than the S&P 500, so a 10% market drawdown could translate into an 18%+ decline. Competitive threats persist from private-label brands and shifting consumer preferences, while regulatory headwinds around chemical lawn products could pressure volumes. The Hawthorne divestiture removes a distraction but also eliminates a growth option, and the stock's -25.81 percentage point underperformance versus SPY over three months highlights negative sentiment that could persist.
Worst-case scenario: a combination of a consumer spending downturn, a lost major retail contract, and a dividend cut could trigger a retest of the 52-week low of $47.90, representing a -12.2% decline from $54.57. If the low is broken, momentum selling could drive the stock toward the $40s, and the -34.07% max drawdown over the period shows the potential for severe losses. A more extreme bear case might see the stock fall to the analyst low target of $60? No, that is above the current price; the true downside is the 52-week low of $47.90, and below that, the next support is not defined, but a -20% to -30% decline from current levels is plausible in a severe recession scenario.
FAQ
The most severe risk is financial: negative shareholders' equity (ROE -40.62%) and a dividend payout ratio of 106.3% mean the dividend is not covered by earnings and could be cut. Second is operational: revenue is declining (-1.34% YoY) and gross margin is compressing (31.22% vs. 31.82%), with heavy concentration in Home Depot and Lowe's. Third is market: the stock has a beta of 1.85, so it is highly sensitive to market downturns, and it has underperformed SPY by -25.81 percentage points over three months. Fourth is company-specific: the Hawthorne divestiture may not yield the expected margin improvement, and the stock has a 5.02 short ratio, indicating bearish sentiment.
Our 12-month forecast has three scenarios: bull case (25% probability) targeting $72-$82, base case (50%) targeting $60-$73, and bear case (25%) targeting $47.90-$60. The base case is most likely, assuming modest revenue stabilization and gradual margin improvement, with the stock reaching the analyst average target of $72.83. The key assumption is that EPS meets the consensus of $6.27, which requires successful margin recovery post-Hawthorne. The bear case assumes a dividend cut or revenue acceleration to the downside, while the bull case requires gross margin expansion above 35% and debt reduction.
SMG appears undervalued on forward earnings, with a forward PE of 11.61x versus a trailing PE of 22.60x, reflecting expected EPS growth to $6.27. The PS ratio of 0.96x is near the low end of its historical range (2.22x-11.90x), suggesting the market is pricing in pessimism. However, the EV/EBITDA of 13.22x is not cheap and reflects the heavy debt load. Relative to the Basic Materials sector, the forward PE is at a discount, but that discount is justified by negative book equity and revenue decline. The market is implying skepticism about the recovery; if earnings meet estimates, the stock could re-rate higher, but if not, it could remain depressed.
SMG is not a compelling buy at current levels for most investors due to its weak balance sheet (negative equity, ROE -40.62%) and dividend coverage risk (payout ratio 106.3%). However, for risk-tolerant investors, the stock offers 33.5% upside to the average analyst target of $72.83 and trades at a forward PE of 11.61x, which is cheap if earnings recover. The biggest downside risk is a retest of the 52-week low of $47.90, representing -12.2% from $54.57. A good entry point would be closer to $48-$50 or after evidence of margin expansion. Overall, it is a speculative buy only for those with a high risk tolerance and a long-term horizon.
SMG is more suitable for long-term investment (minimum 2-3 years) given its turnaround nature and high volatility (beta 1.85). The stock is not a short-term trading vehicle due to its wide analyst target spread and low liquidity (volume 1.32M). The dividend yield of 4.70% is attractive for income investors, but the 106.3% payout ratio makes it risky. Long-term investors should monitor the balance sheet and margin trends; a turnaround could take several quarters. Short-term traders might exploit the high beta and oversold bounces, but timing is difficult. A suggested minimum holding period is 18-24 months to allow for margin recovery and debt reduction.