The Scotts Miracle-Gro Company (NYSE:SMG), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Scotts Miracle-Gro’s outlook and valuation to see if the opportunity still exists.
What's The Opportunity In Scotts Miracle-Gro?
According to my valuation model, the stock is currently overvalued by about 33%, trading at US$71.44 compared to my intrinsic value of $53.65. This means that the opportunity to buy Scotts Miracle-Gro at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Scotts Miracle-Gro’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Scotts Miracle-Gro?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted revenue growth of 9.9% 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? It seems like the market has well and truly priced in SMG’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SMG should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on SMG for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for Scotts Miracle-Gro you should be mindful of and 2 of these are potentially serious.
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.
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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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