SMG
The Scotts Miracle-Gro Company
$65.48
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 27.4% above fair value
You pay
$65.48
Bear
$31.62
Fair
$51.38
Bull
$71.15
Bear
$31.62
-51.7%
$6.81 × 7x + net cash
Fair
$51.38
-21.5%
$6.81 × 10x + net cash
Bull
$71.15
+8.7%
$6.81 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($6.81)
Implied Market Multiple
9.6x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $72.75 from 17 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $51.38 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 $72.75 (from 17 analysts). Our estimate is 39% 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