Scott’s Miracle-Gro Cannabis Stock
Scotts Miracle-Gro (NYSE: SMG) aligns the manufacturing, marketing, and distribution of products and accessories for gardening. It operates through the following segments: U.S. Consumer, Hawthorne, and Other. The U.S. Consumer segment consists of consumer lawn and garden business. The Hawthorn segment includes indoor, urban, and hydroponic gardening business. The Other segment refers to the consumer lawn and garden business in geographies other than the U.S. and product sales to commercial nurseries, greenhouses, and other professional customers.
Scott’s Miracle-Gro Fundamental Analysis
Profile
HQ: Marysville, OH, USA
Founded: 1868
Facilities: OH, WA, CA, OR
Symbol: SMG (NYSE)
Focus: Strong
Scotts Miracle-Gro is the world’s largest maker and distributor of consumer lawn and garden products. They are the oldest company we will review in the cannabis and hemp spaces. They began in 1868 selling lawn seed in Ohio. Their business now spans some of the most well-known brands across any industry and covers almost the entire planet. Its business arm called Hawthrone covers all hydroponic and indoor garden businesses so this is where they are gaining among cannabis and hemp cultivators.
Size: Strong
Market Cap: US $7.98 bil
Enterprise Value: US $10.3 bil
Number of employees: 5600
Markets: Strong
Operations: Strong
Cultivation:
Current production: NA, they do not directly cultivate
Distribution:
Direct sales: Yes, online
Store networks: They sell their products at all the largest retail chains and thousands of hardware stores across the planet
Supply agreements: They have an exclusive agreement with Monsanto for marketing and distribution of Roundup branded products
Supply deals: Recent deal with Canndoc (Israel) to supply 6,000 kg of dried flower!
New Brunswick: 5000 kgs/year (11,000 lbs)
PEI: 1000 kgs/year
Manitoba: 1000kgs/yr
Other deals: Not disclosed
Integration/Diversification:
Vertically integrated: No, they just support cannabis and hemp businesses
Horizontally diversified: Yes
Financials: Strong
Revenue (Q2 2020): $1.8 billion (16% increase over Q2 2019)
Shares Outstanding (diluted): 55.5 mil
Profit Margin: 9.50%
Management: Strong
CEO: James Hagedorn
CFO: Thomas Randal Coleman
COO: Michael Lukemire
They have an experienced team with a clear pathway to increasing revenue. Covid-19 hasn’t slowed them down a bit. The CEO has been with them for 32 years, the COO for 23, and the CFO for 20. They know what goes on within the company business.
Branding: Strong
Strong focus on branding. They have some of the most recognizable brands in the world with Scotts, Miracle-Gro, Ortho, Roundup, Tomcat, General Hydroponics, Botanicare, AeroGarden, Can-Filters, Gavita, and many more.
Valuation: Strong
Current share price: US $146.04
Price to Sales: 2.38
EV / Revenue: 3.01
52 week low/high: US $76.50-$151.03
Price/Book: 10.11
Financing: Strong
At 2019’s conclusion the company had $420 million in working capital and $184 million in free cash flow. They had this with over $3 billion in net sales. They have plenty of capital to do whatever they want to do this year.
Scott’s Miracle-Gro Technical Analysis
Should I buy Scott’s Miracle-Gro Cannabis Stock?
Follow Stephen Goldman as he evaluates SMG using the Stochastic, Aroon, and the Money Flow Indicator (MFI) to clearly see if and when to buy on multiple timeframes.
Remember sound cannabis stock trading strategies include both Fundamental Analysis and Technical Analysis.
Bottom Line: Is Scott’s Miracle-Gro Cannabis Stock a Buy?
Recommendation: Strong
Scotts Miracle-Gro is the leading consumer products marketer for lawn and garden care. During the gold rush, the folks selling picks and shovels got rich, not the miners. SMG supplies the cannabis and hemp industry with all the tools they need to cultivate high quality products but takes on none of the risk associated with growing the product themselves.
Their commitment to cannabis and hemp is outlined by their corporate statement: “We support states’ efforts to develop responsible and effective regulation governing legalized cannabis. This support includes engaging with state and federal lobbying consultants and providing consistent, sustaining support to a 501(c)4, The Good Growth Alliance, to advance policy and educational efforts related to a variety of issues that impact society, our business and our customers and consumers; including legalization efforts.”
Company wide sales have not slowed a bit during covid-19 in 2020 (a rarity across the industry). They reported 16% increases in sales during Q2 2020 company wide. Their business arm Hawthorne (sells to cannabis cultivators) is expecting 30 to 35% growth for all of 2020.
Will its stock price improve from where it is today at US$146? We think so!
Their branding is very strong, exclusive agreements with Monsanto and others have them locked in and strong sales in backyard gardens during quarantine periods in the USA have sales up for 2020. For the first six months of 2020 they’ve already reported sales of $1.75 billion (up 18% of 2019) with Hawthorne’s contribution up 51%! We think they are as strong of a buy as it gets and 2020 should yield nice returns.
There are plenty of other great hemp and cannabis stocks with high growth potential. Check out our Featured Companies Reports page to read about some of our favorites.