uploads///SMGs Valuation Multiple

Comparing Scotts Miracle-Gro’s Price-To-Earnings Ratio

By

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

Relative valuation

Earlier in this series, we discussed The Scotts Miracle-Gro Company’s (SMG) forward PE (price-to-earnings) ratio over a 16-year period. We saw that the company has been recently trading at a PE ratio of 21x, which is a 16-year high. Although the PE ratio is a tool for relative valuation, bear in mind that there are no perfectly comparable companies.

Article continues below advertisement

Comparing with peers

The peers in the chart above are currently trading at a median forward PE of 19x. The Home Depot (HD), which is one of Scotts’s major customers, is trading at a multiple of 19x. Lowes (LOW), which also sells Scotts’s products, is trading at a multiple of 16x.

Spectrum Brands (SPB), which caters to the same market as Scotts Miracle-Gro, is trading at 20x. Agrium (AGU), which has a large retail network of fertilizers (MXI) in the United States, is trading at 18.7x.

We compare Scotts Miracle-Gro’s PE ratio with other companies’ because of a belief in the law of one price, which states that similar assets should trade at a similar price. The lower the PE ratio, the better, because it is what you would pay for one unit of earnings in a company. Next, we’ll discuss how the company’s stock has trended with analysts’ ratings over the years.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.