>>> Scotts Miracle-Gro (NYSE:SMG) is primarily a lawn and garden care products company, but over the years, through its Hawthorne Gardening subsidiary, SMG has become a major player in the cannabis cultivation space. However, in 2022 and 2023, this $1.7 billion wager has soured.
Hawthorne’s weak performance, coupled with other factors, led to overall declines in revenue and profitability. In turn, that drove a sharp drop in the SMG stock price since 2021. Sure, in more recent quarters, fiscal performance has bounced back. This has resulted in a rebound for SMG shares of nearly 18%. Scott Miracle-Gro’s latest earnings beat resulted in shares hitting a new 52-week high on July 31.
However, following this sentiment shift, SMG now trades for around 21.7 times forward earnings. This represents a big valuation premium to other agricultural input companies. For now, bullishness about legalization could sustain SMG’s current share price. If hope and hype fade, though, it may cause the stock to start moving in the wrong direction once again. Downside risk may be more modest here than, with more speculative pot plays. Nevertheless, you may want to stay away.
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