The Scotts Miracle-Gro Company (SMG): A Bull Case Theory

We came across a bullish thesis on The Scotts Miracle-Gro Company (SMG) on TSOH Investment Research’s Substack. In this article, we will summarize the bulls’ thesis on SMG. The Scotts Miracle-Gro Company (SMG)’s share was trading at $57.31 as of 2^nd June. SMG’s trailing and forward P/E were 98.81 and 12.38 respectively according to Yahoo Finance.

Scotts Miracle-Gro (SMG) presents a compelling turnaround opportunity as it shifts focus back to its core U.S. Consumer lawn and garden business after years of missteps, particularly the overextension into the cannabis-adjacent Hawthorne segment. With the Hawthorne spin-off largely complete—and SMG retaining 95% of future upside from a potential transaction—the company is now prioritizing operational discipline and shareholder returns.

CEO Jim Hagedorn has acknowledged past errors and is guiding SMG toward a leaner capital structure, with leverage targeted around 3.25–3.5x, a notable shift from its previously aggressive acquisition strategy. The core business is showing renewed momentum, with 12% unit growth in 1H FY25 and 9% growth in FY24, driven by promotional support and strategic retailer alignment. This volume-driven growth, while impacting near-term pricing power, sets the stage for operating leverage and improved margins.

Management is targeting $700 million in EBITDA by FY27 and plans to return capital to shareholders through dividends and buybacks, potentially reducing the share count by over 5% annually. At ~12x EV/EBIT, the stock appears undervalued relative to its normalized earnings power and improved strategic direction. If SMG can deliver on its volume and margin recovery plan while maintaining disciplined capital allocation, the stock offers attractive upside potential driven by earnings growth, deleveraging, and capital returns.

For a comprehensive analysis of another standout stock covered by the same author, we recommend reading our summary of their bullish thesis of Ally Financial Inc. (ALLY).

The Scotts Miracle-Gro Company (SMG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held SMG at the end of the first quarter which was 33 in the previous quarter. While we acknowledge the risk and potential of SMG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.