Analyzing Scotts Miracle-Gro’s Valuation Multiple

As of April 24, Scotts Miracle-Gro (SMG) was trading at a forward PE (price-to-earnings) multiple of 22.5x. In recent months, Scotts Miracle-Gro’s valuation rose. Much of the company’s growth has been driven by acquisitions, which might explain why its valuations rose.

Scotts Miracle-Gro was trading at a premium to its peers’ median as of April 24, 2017. It has been trading higher than its peers in the last few months. Its peers’ include Spectrum Brands Holdings (SPB), Home Depot (HD), and Lowe’s (LOW). Spectrum Brands was trading at a forward PE multiple of 24.5x, Home Depot was trading at a forward PE multiple of 21.1x, and Lowe’s was trading at a multiple of 18.2x. Agrium (AGU), which has a large retail network of fertilizers (XLB) in the US, is trading at 17.2x.

Recently, analysts increased their estimates for Scotts Miracle-Gro’s EPS, which might have fueled the uptick in valuation multiples. Scotts Miracle-Gro’s recent list of acquisitions include companies that serve the indoor gardening market. The acquisitions have been a catalyst for investors expecting the legalization of marijuana in the US, which could help the company’s sales move higher.

We’ll release our post-earnings analysis following the company’s earnings release on May 2, 2017. In the meantime, visit Market Realist’s Agricultural Fertilizers page.