Yahoo Finance Further weakness as Scotts Miracle-Gro (NYSE:SMG) drops 5.0% this week, taking three-year losses to 61%
The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of The Scotts Miracle-Gro Company (NYSE:SMG) have had an unfortunate run in the last three years. Sadly for them, the share price is down 65% in that time. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.
Since Scotts Miracle-Gro has shed US$190m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Scotts Miracle-Gro
Scotts Miracle-Gro isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years Scotts Miracle-Gro saw its revenue shrink by 15% per year. That's definitely a weaker result than most pre-profit companies report. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 18% per year over that time. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. It could be a while before the company repays long suffering shareholders with share price gains.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Scotts Miracle-Gro's TSR for the last 3 years was -61%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Scotts Miracle-Gro provided a TSR of 5.8% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Scotts Miracle-Gro (1 is significant!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
