Why The Scotts Miracle-Gro Company (NYSE:SMG) Could Be Worth Watching

The Scotts Miracle-Gro Company (NYSE:SMG), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Scotts Miracle-Gro’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Scotts Miracle-Gro

What Is Scotts Miracle-Gro Worth?

The stock is currently trading at US$69.74 on the share market, which means it is overvalued by 32% compared to my intrinsic value of $52.96. Not the best news for investors looking to buy! 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.

What does the future of Scotts Miracle-Gro look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of Scotts Miracle-Gro, it is expected to deliver a relatively unexciting top-line growth of 9.8% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near 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. At this current price, shareholders may be asking a different question – should I 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 can't be ignored.

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.