• If you have been wondering whether Scotts Miracle-Gro at around US$66 per share still offers value, you are not alone. This article is designed to help you frame that question in a structured way.
• The stock shows a mixed return picture, with a 7 day return of 5.3% decline, a 30 day return of 3.9%, year to date returns of 11.3%, a 1 year return of 11.2%, a 3 year return of 1.0% decline, and a 5 year return of 64.0% decline.
• Recent coverage of Scotts Miracle-Gro has focused on its share price performance and how investors are reassessing the business after a difficult multi year stretch. This context is important, as it can influence whether the current price is seen as an opportunity or a warning sign.
• On our checks, Scotts Miracle-Gro has a valuation score of 3 out of 6, hinting that some metrics point to undervaluation while others do not. Next, we will look at the standard valuation approaches investors often rely on, before finishing with a way to think about value that can be even more helpful.

Approach 1: Scotts Miracle-Gro Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a company could generate in the future and discounts those amounts back to today, to arrive at an implied value per share.

For Scotts Miracle-Gro, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is reported at about $359.3 million. Analysts and extrapolated estimates then project cash flows for the coming decade, including a projected free cash flow of about $282.5 million in 2035 based on the supplied schedule. All of these future cash flows are in US$ and are discounted back to today using the model assumptions.

On this basis, the DCF output suggests an estimated intrinsic value of about $73.38 per share, compared with a current share price around $66. That implies the stock is about 9.8% undervalued, which is a relatively small gap and could be interpreted as close to fair value.

Result: ABOUT RIGHT

Scotts Miracle-Gro is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Scotts Miracle-Gro Price vs Earnings

For a company that is generating earnings, the P/E ratio is a common way to check how much you are paying for each dollar of profit. Investors usually accept a higher P/E if they expect stronger growth or see lower risk, while slower growth or higher risk tends to justify a lower, more cautious P/E.

Scotts Miracle-Gro currently trades on a P/E of about 23.5x. That sits close to the broader Chemicals industry average P/E of about 23.3x, and above the indicated peer group average of around 17.0x. On the surface, that suggests the market is willing to pay more for Scotts Miracle-Gro than for some peers.

Simply Wall St’s Fair Ratio for Scotts Miracle-Gro is about 24.4x. This Fair Ratio is a proprietary estimate of what the P/E could be, given factors such as the company’s earnings profile, industry, profit margins, market value and risk characteristics. Because it blends these company specific inputs, it can be more tailored than a simple comparison with peers or an industry average.

With the current P/E of 23.5x sitting slightly below the Fair Ratio of 24.4x, the stock screens as modestly undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Scotts Miracle-Gro Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St's Community page that lets you spell out the story you see for Scotts Miracle-Gro, link that story to your own revenue, earnings and margin assumptions, translate those assumptions into a Fair Value, and then compare that Fair Value with the current price. The system updates your Narrative when new news or earnings arrive so you can quickly see, for example, how one investor who sees stronger earnings certainty and arrives at a Fair Value around US$89.93 can sit alongside another who takes a more cautious view closer to US$68.00.

Do you think there's more to the story for Scotts Miracle-Gro? Head over to our Community to see what others are saying!

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.