uploads///SMGs versus Industry Returns

Comparing Scotts Miracle-Gro’s Returns


Dec. 29 2016, Updated 6:21 p.m. ET


Investors delay today’s consumption and invest so that they can have more tomorrow. While there are many investment vehicles to help achieve that purpose, investors are attracted to equities or stocks for the possibility of getting better returns. Within equity, the goal is to find the companies that can yield higher returns. In this part, we’ll discuss how The Scotts Miracle-Gro Company’s (SMG) returns compare with peers’ (SOIL).

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ROIC (return on invested capital) shows the returns for all providers of capital to a company, including debt and equity holders. At 12%, Scotts’s ROIC is almost double that of Spectrum Brands (SPB), Central Garden & Pet (SPB), and Seaboard (SEB). These companies have products that overlap with Scotts Miracle-Gro’s, but as discussed earlier, Scotts’s ability to generate higher margins could mean more left for investors.

ROE (return on equity) is what matters most to investors in common stocks. SMG’s ROE stands at 38%, which is much higher than Spectrum’s and Seaboard’s 21%. Central Garden (CENT) had the lowest ROE, at 8%.

ROA (return on assets) divides a company’s net income by total assets. It is often used as a measure to identify how efficiently management is using its company’s assets to generate earnings. Scotts’s ROA of 15% beats all peers in the chart above, which had ROAs of 6%. Next, we’ll discuss key people at SMG.


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