Yahoo Finance Further weakness as Scotts Miracle-Gro (NYSE:SMG) drops 5.2% this week, taking three-year losses to 50%
As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term The Scotts Miracle-Gro Company (NYSE:SMG) shareholders have had that experience, with the share price dropping 55% in three years, versus a market return of about 36%. And more recent buyers are having a tough time too, with a drop of 31% in the last year. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since Scotts Miracle-Gro has shed US$196m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Scotts Miracle-Gro
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Scotts Miracle-Gro saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Scotts Miracle-Gro's TSR for the last 3 years was -50%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Scotts Miracle-Gro shareholders are down 29% for the year (even including dividends), but the market itself is up 1.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Scotts Miracle-Gro (of which 1 is potentially serious!) you should know about.
We will like Scotts Miracle-Gro better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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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