Will Scotts Miracle-Gro’s Free Cash Flow Rise in 2017?



Free cash flows

In the previous part of this series, we looked at capital expenditure estimates for Scotts Miracle-Gro (SMG). What’s left after capital expenditure is known as free cash flow. Investors and analysts often watch free cash flow growth very closely. The metric is also used in discounted cash flow valuations to arrive at the fair value of the stock.

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Analyst estimates

In 1Q17, Wall Street analysts are estimating the company to report -$312 million in free cash flows. In the second quarter, analysts estimate the company will report free cash flows of -$276 million. However, the third and the fourth quarter results are expected to more than offset the negative free cash flow for the first two quarters. Analysts are estimating free cash flows of $272 million in 2017, which would compare to $179 million in 2016, or a growth of 52.1%.

In the next part of this series, we’ll discuss valuation multiples and forward PE (price-to-earnings) for Scotts Miracle-Gro and compare these figures with its historical two-year average as well as with peers Spectrum Brands Holdings (SPB), Home Depot (HD), Central Gardens (CENT), and other companies in the industry (MXI).


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