SMG
The Scotts Miracle-Gro Company
$49.72
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 160.1% above fair value
You pay
$49.72
Bear
$14.08
Fair
$19.11
Bull
$24.14
Bear
$14.08
-71.7%
$2.01 × 7x
Fair
$19.11
-61.6%
$2.01 × 10x
Bull
$24.14
-51.4%
$2.01 × 12x
Adjust Assumptions
9.5x
2.01$
Key Value Driver
Through-cycle normalized EPS ($2.01)
Implied Market Multiple
24.7x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (17 analysts)
$77.25
Divergence from AlphaVal
75%
Summary
Using 7-year normalized EPS of $2.01 at a 10x cycle multiple, the base-case value is $19.11 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Wall Street's average price target is $77.25 (from 17 analysts). Our estimate is 75% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing