Breaking Down The Scotts Miracle-Gro Company (SMG) Financial Health: Key Insights for Investors

You're looking at The Scotts Miracle-Gro Company (SMG) and trying to figure out if the turnaround story is real, especially after a couple of tough years. Honestly, the fiscal year 2025 results, released this November, show a company that is defintely executing on margin improvement, even if the top line is still a bit soft. Full-year net sales came in at $3.41 billion, a slight dip from the prior year, but the real story is the profitability pivot: they swung from a net loss to a GAAP net income of $145.2 million. Plus, the non-GAAP adjusted earnings per share (EPS) jumped 63% to $3.74 per share, fueled by a strong adjusted gross margin rate of 31.2%, which is a 490 basis point expansion. That's a serious margin expansion. Now, the long-term debt load is still a factor, sitting at about $2.05 billion at year-end, but with $274 million in free cash flow, they have breathing room to manage it. The question is, does the market's 'Moderate Buy' consensus and average price target of $69.50 truly reflect the near-term risk in the Hawthorne segment, or is the core U.S. Consumer business strong enough to carry the weight?

Revenue Analysis

You're looking for clarity on where The Scotts Miracle-Gro Company (SMG) is actually making its money, especially after a challenging market cycle. The direct takeaway is that while total net sales dipped in fiscal year 2025, the core business-the one that matters most to long-term stability-showed a small but important gain. You need to focus on the segment breakdown, not just the headline number.

For the full fiscal year 2025, The Scotts Miracle-Gro Company reported total net sales of approximately $3.41 billion. This figure represents a 4% decrease from the prior fiscal year. Honestly, that decline is a headwind, but it mostly hides the underlying strength in their primary market. The company's revenue streams are clearly segmented, and the performance split is critical for your analysis.

• U.S. Consumer: Lawn and garden products for homeowners.
• Hawthorne: Indoor and hydroponic gardening supplies.
• Other: Smaller or international operations.

The U.S. Consumer segment is the powerhouse, delivering $2.99 billion in net sales for fiscal 2025. Here's the quick math: that's about 87.7% of the company's total revenue, cementing its role as the primary revenue source. Even better, when you exclude nonrecurring sales from the prior year, the U.S. Consumer segment actually saw a 1% increase in sales, driven by strong consumer demand for core products like lawn care and Roundup. That's resilience.

What this estimate hides is the drag from the Hawthorne segment, which focuses on the hydroponics market. The decline in that segment's net sales was the main driver of the overall 4% drop in total company revenue. This segment, combined with 'Other' businesses, accounted for the remaining approximately $420 million in net sales. This disparity shows a clear divergence: the traditional outdoor business is stable to growing, but the indoor growing business is still contracting against broader market challenges.

A significant change to note is the continued shift toward digital channels. E-commerce penetration for the company has climbed dramatically, reaching 10% of sales in fiscal 2025, up from just 2% in 2019. Also, the company divested its Hawthorne professional horticulture business in the Netherlands, streamlining the segment and focusing on core operations. These actions are smart moves to cut losses and focus capital.

Here is a simplified breakdown of the fiscal 2025 segment contributions:

Your action here is to keep a close eye on the Hawthorne segment's stabilization, but defintely anchor your valuation to the steady, dominant performance of the U.S. Consumer segment. You can read more about this in our full analysis: Breaking Down The Scotts Miracle-Gro Company (SMG) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking at The Scotts Miracle-Gro Company (SMG) because you see a brand powerhouse, but the real question is whether that brand power translates to sustainable profit. The short answer for fiscal year 2025 is a resounding 'yes, it's recovering strongly.' The company delivered a major profitability turnaround, moving from a net loss to solid net income, driven by sharp operational focus.

For the full fiscal year ending September 30, 2025, The Scotts Miracle-Gro Company reported total sales of $3.41 billion. What matters most is how much of that revenue they kept. The profitability story is one of significant margin expansion, which is defintely the key takeaway for investors right now.

Here's the quick math on the core margins:

• Gross Profit Margin: The GAAP gross margin rate stood at 30.6%. The non-GAAP adjusted gross margin rate, which is a better gauge of core business performance, was 31.2%.
• Operating Profit Margin: This margin, which shows efficiency before interest and taxes, was approximately 12.96%.
• Net Profit Margin: The company achieved a net income of $145.2 million, resulting in a net profit margin of about 4.25%.

The trend in profitability is the most compelling part of the story. In the prior fiscal year, The Scotts Miracle-Gro Company posted a net loss of $34.9 million. The shift to a $145.2 million net income in 2025 shows a dramatic reversal. The adjusted gross margin rate of 31.2% improved by a substantial 490 basis points over the prior year, exceeding management's internal targets. This isn't just a blip; it's the result of a deliberate, multi-year strategy in action.

When we compare these ratios to industry averages, we see where the company still has room to run. The lawn and garden service industry often targets a net profit margin of 10% to 14%, and even the broader Consumer Packaged Goods (CPG) sector considers 10% to be an average net profit margin. The Scotts Miracle-Gro Company's 4.25% net margin, while a huge win over the prior year's loss, still lags these benchmarks. This gap highlights the margin pressure typical of a high-volume, branded manufacturer that relies on large retailers, but also points to the potential upside as they execute their midterm plan to reach gross margin rates in the mid-30% range by fiscal 2027.

Operational efficiency is clearly the engine driving this turnaround. The company delivered $75 million in cost savings in fiscal 2025 alone, which is a massive win for the bottom line. This improvement is a direct result of supply chain optimization, material cost deflation, and a strategic shift in product mix away from lower-margin commodities toward their higher-margin branded products. This focus on efficiency is also reflected in the Non-GAAP Adjusted EBITDA, which jumped to $581 million, an improvement of $71 million over the prior year. That kind of cash generation gives them critical flexibility. For more context on the long-term strategic direction, you can review their Mission Statement, Vision, & Core Values of The Scotts Miracle-Gro Company (SMG).

The clear action here is to watch the margin trend in 2026; specifically, if the adjusted gross margin can hit the projected target of at least 32%.

Debt vs. Equity Structure

The Scotts Miracle-Gro Company (SMG) is currently leaning heavily on debt financing, a situation reflected in its negative shareholders' equity. You need to understand that while the company is aggressively paying down debt, its capital structure remains highly leveraged, which is a key risk factor to monitor.

As of the end of fiscal year 2025, September 30, the company's total debt stood at approximately $2.11 billion. This is a significant figure, but it's important to break down where that debt sits on the balance sheet.

• Long-Term Debt: $2,049.2 million, which is the bulk of the obligation.
• Short-Term Debt & Capital Lease Obligation: $57.2 million, a relatively small portion.

Here's the quick math on leverage: The company's total stockholders' equity was a deficit of $-357.5 million in fiscal 2025. This negative equity, stemming from years of share repurchases and recent operating losses, is why the Debt-to-Equity (D/E) ratio is a massive -5.89. A negative D/E ratio is defintely a flashing yellow light, meaning liabilities exceed assets.

To be fair, the median D/E ratio for the broader Agriculture industry is a more manageable 2.23, so The Scotts Miracle-Gro Company (SMG) is an outlier. Still, the company's focus is on the Net Debt to Adjusted EBITDA leverage ratio, which improved to 4.1x by the end of fiscal 2025, down from 4.86x the prior year. That's a solid step in the right direction.

The company is actively working to de-risk its balance sheet. In fiscal 2025, The Scotts Miracle-Gro Company (SMG) paid down $120 million in debt, prioritizing cash flow for debt reduction over share repurchases. This deleveraging momentum led S&P Global Ratings to revise the company's outlook to Positive from Stable in August 2025, while affirming its existing 'B+' issuer credit rating. The market is rewarding this operational focus. The company's strategic goals are clearly laid out in their Mission Statement, Vision, & Core Values of The Scotts Miracle-Gro Company (SMG).

The balance is currently all about debt reduction. They are using operating cash flow to pay down debt, effectively using internal funding to repair the balance sheet instead of relying on new equity issuance, which would dilute existing shareholders. They expect to generate at least $200 million of reported free operating cash flow (FOCF) in fiscal 2025, which is earmarked for dividends and debt repayment.

The clear action for you: Monitor their progress toward their internal net leverage target of 3x. If they continue to execute on cost savings and debt paydown, that leverage ratio will drop, and the credit risk will diminish, making the stock a much safer long-term hold.

Liquidity and Solvency

You're looking for a clear read on The Scotts Miracle-Gro Company (SMG)'s ability to meet its near-term obligations, and the 2025 fiscal year data shows a company prioritizing debt reduction and cash generation. The liquidity position is adequate, but it relies heavily on selling through its substantial inventory. The cash flow story, however, is a strong positive, showing real operational improvement.

We need to look at the Current Ratio and Quick Ratio (acid-test ratio) to see how liquid the balance sheet is. Here's the quick math for the fiscal year ended September 2025:

The Current Ratio of 1.27 is decent, meaning The Scotts Miracle-Gro Company has $1.27 in current assets for every dollar of current liabilities. This is a safe margin. But, the Quick Ratio of 0.47 is low. This ratio excludes inventory, which is the least liquid current asset. It means that without selling inventory, the company has less than half a dollar in highly liquid assets (like cash and receivables) to cover each dollar of immediate debt. That's a key risk, but it's defintely common for a seasonal, inventory-heavy business like this.

Working Capital and Cash Flow Trends

The company's working capital position at the end of fiscal 2025 was a positive $200.6 million, which is a healthy buffer. The trend shows management has been focused on working capital efficiency, which is a necessary move given their high inventory levels. A major part of their liquidity strength comes from the money they generate, not just the assets they hold.

The cash flow statement for 2025 tells a story of financial discipline and deleveraging:

• Operating Cash Flow (CFO): While the full-year CFO number isn't explicitly detailed, the operational improvements are clear. The focus on cost savings and margin expansion is directly fueling the strong free cash flow.
• Free Cash Flow (FCF): The Scotts Miracle-Gro Company delivered a strong FCF of $274 million for the full fiscal year 2025. This figure exceeded their expectations and is the clearest indicator of their ability to generate cash after capital expenditures.
• Investing Cash Flow (CFI): The company had a cash outflow from investing activities, such as the approximately -$60 million seen in the third quarter of 2025. This is typical for a company making necessary capital expenditures (CapEx) to maintain or grow its operations, like the strategic investments in AI and robotic automation mentioned by management.
• Financing Cash Flow (CFF): The financing activities showed a significant net outflow, including the approximately -$158.2 million seen in the third quarter of 2025. This is a positive signal for investors, as the company used its generated cash to pay down $120 million in debt during the year, strengthening the balance sheet and improving the leverage ratio to 4.1x from 4.86x.

The biggest strength here is the strong FCF generation, which is being deliberately channeled into debt reduction. The main liquidity concern remains the high reliance on converting the $592.8 million in inventory into cash to cover short-term liabilities, a typical seasonal challenge. For more on the long-term vision driving these financial decisions, you can read the Mission Statement, Vision, & Core Values of The Scotts Miracle-Gro Company (SMG).

Valuation Analysis

You're looking at The Scotts Miracle-Gro Company (SMG) and asking the right question: Is the stock cheap, expensive, or fairly priced right now? The short answer is that traditional metrics suggest a mixed picture, but the forward-looking earnings story points toward a compelling value, which is why analysts are leaning 'Buy.'

Here's the quick math on the valuation ratios as of November 2025. We have to look past the trailing numbers, which are still digesting a tough year, and focus on the company's own fiscal year 2025 guidance.

• Trailing Price-to-Earnings (P/E): The trailing P/E ratio sits high at around 23.44, reflecting the lower earnings per share (EPS) of approximately $2.42 over the last twelve months (TTM).
• Forward P/E: This is the key. Based on management's fiscal year 2025 EPS guidance of $4.15 to $4.35, the forward P/E drops significantly to about 12.73. That's a defintely more attractive multiple for a consumer staple business.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio, which accounts for debt, is currently around 9.2x. For context, the industry median is often higher, so this multiple suggests the company is not overly expensive on an operating basis.
• Price-to-Book (P/B): The P/B ratio is a red flag at approximately -18.1. What this estimate hides is that the company has negative shareholder equity, largely due to a high debt load and significant share repurchases over time. It means you can't rely on book value for a floor here.

The stock has had a rough ride, still. Over the 12 months leading up to November 2025, the stock price has fallen by a substantial 21.36% to 38.47%, depending on the exact comparison point. The 52-week trading range shows the volatility, swinging from a low of $45.61 to a high of $83.55. This price compression is what sets up the current opportunity, assuming the earnings recovery materializes.

For income investors, The Scotts Miracle-Gro Company (SMG) offers a solid dividend, but you need to understand the coverage. The annual dividend is $2.64 per share, translating to a dividend yield of around 4.9%. The payout ratio based on earnings is high, at over 104% to 106.88%, meaning they are paying out more than they earned in net income. But, to be fair, the cash flow story is better: the cash payout ratio is a more sustainable 55.7%, indicating the dividend is covered by cash flow from operations.

The Street sees the potential for a rebound. The analyst consensus is a 'Moderate Buy' or 'Buy' rating, with an average 12-month price target ranging from $68.14 to $69.50. This implies a significant upside from the current share price. The bullish case rests heavily on the company executing its turnaround, reducing its debt, and delivering on that $4.15 to $4.35 EPS forecast for fiscal year 2025. If you want to dig into the institutional view on who is betting on this turnaround, you can read more here: Exploring The Scotts Miracle-Gro Company (SMG) Investor Profile: Who's Buying and Why?

Risk Factors

You're looking at The Scotts Miracle-Gro Company (SMG) after a strong fiscal 2025, where they drove massive margin expansion and cash flow. But as a seasoned analyst, I always map the near-term risks that could derail that momentum. The biggest threats right now are managing their debt load and successfully executing the messy cleanup of their hydroponics business, Hawthorne.

The company's financial health is defintely improving, but it's still highly leveraged. At the end of fiscal 2025, their leverage ratio (total debt to Adjusted EBITDA) was still 4.1x, down from 4.86x the prior year, but still high. They paid down $120 million in debt with their strong free cash flow of $274 million in FY25, which is a clear, positive action. Still, high interest rates make that debt a constant headwind, limiting their financial flexibility for large-scale acquisitions or share buybacks until they hit their target of the 'high 3's' leverage ratio in fiscal 2026.

Operationally, the biggest risk is the Hawthorne segment. This part of the business has been a drag, and the execution risk around its portfolio cleanup is a key watchpoint for investors. Management is committed to shifting SMG back to a pure lawn and garden branded consumer business, which is smart, but any delay in that strategic cleanup could keep a lid on the stock price and distract from the core business's strength.

External factors, as always in this industry, are a major concern. You can't control the weather, and unfavorable conditions-like a cold spring or a drought-can directly impact demand for their products, hitting their net sales, which were already down 4% to $3.41 billion in fiscal 2025. Also, their reliance on a few large retail partners means those partners have significant bargaining power, making SMG's margins vulnerable if they shift their strategies.

Here's the quick math on their current mitigation strategies:

• Financial Risk: Reduced debt by $120 million in FY25.
• Operational Risk: Drove a 490 basis point expansion in adjusted gross margin to 31.2% in FY25, mainly by shifting product mix to higher-margin items and achieving approximately $100 million in supply chain cost savings.
• Market Risk: Expanded e-commerce, which saw 51% unit growth in FY25 and now makes up 10% of total sales, diversifying their retail channels.

What this estimate hides is the potential impact of new environmental or public health regulations, which could increase their cost of doing business or limit their ability to market certain products, especially in the chemical space. That's a long-term, unquantifiable risk you need to keep on your radar.

For a deeper dive into the company's performance metrics, check out our full report: Breaking Down The Scotts Miracle-Gro Company (SMG) Financial Health: Key Insights for Investors

Growth Opportunities

You're looking at The Scotts Miracle-Gro Company (SMG) and seeing a business in transition, which is defintely where the biggest opportunities-and risks-live. The direct takeaway is this: SMG is aggressively shedding its underperforming Hawthorne segment to become a higher-margin, pure-play consumer lawn and garden powerhouse, backed by strong brand power and a rapidly growing e-commerce channel.

The company's focus on self-help initiatives delivered a strong fiscal year 2025, with full-year sales hitting US$\mathbf{3.41\text{ billion}}$ and non-GAAP earnings per share (EPS) at $\mathbf{\$3.74}$. This performance was driven by margin recovery, specifically a gross margin increase of $\mathbf{490\text{ basis points}}$ to $\mathbf{31.2\%}$, which surpassed internal targets. The key is that they are replacing lower-quality, commodity sales with higher-margin branded products.

Here is the quick math on their operational strength:

• Achieved $\mathbf{\$75\text{ million}}$ in supply chain cost savings in FY2025.
• U.S. Consumer segment point-of-sale (POS) unit growth was $\mathbf{12.1\%}$ through the first half.
• E-commerce POS unit growth surged $\mathbf{51\%}$ in fiscal 2025, now representing $\mathbf{10\%}$ of total revenue.

Strategic Shifts and Future Projections

The biggest strategic driver is the planned exit from the Hawthorne segment, which caters to the indoor gardening market, particularly cannabis cultivation. This segment's net sales tumbled $\mathbf{38\%}$ in the fiscal fourth quarter, and the full-year revenue was projected between $\mathbf{\$250\text{ million}}$ and $\mathbf{\$300\text{ million}}$. Getting this divestiture right is crucial for preserving a significant tax benefit and focusing capital on the core business.

For fiscal year 2026, management has provided a conservative but clear outlook, projecting adjusted earnings per share (EPS) between $\mathbf{\$4.15}$ and $\mathbf{\$4.35}$. This is a solid step up from the 2025 non-GAAP EPS of $\mathbf{\$3.74}$. The company is also targeting an adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) between $\mathbf{\$570\text{ million}}$ and $\mathbf{\$590\text{ million}}$ for FY2025, reflecting strong operational efficiency.

Innovation and Competitive Moats

SMG's competitive advantage (or 'moat') is built on its dominant brand portfolio-Scotts, Miracle-Gro, Ortho, and Tomcat-and its unparalleled distribution network. They are not sitting still, though. Product innovation is heavily focused on two high-growth areas:

• Organics: The organics portfolio is their fastest-growing product line ever.
• Pest Control: Planning to launch over $\mathbf{10}$ new products under the Ortho Control brand.

They are also reinventing the core lawn care business by promoting multi-feeding programs, which encourages consumers to use products more frequently throughout the growing season, effectively increasing the lifetime value of a customer. This shift is a structural change that drives higher incremental unit sales. You can learn more about their long-term vision here: Mission Statement, Vision, & Core Values of The Scotts Miracle-Gro Company (SMG).

The company's commitment to shareholder returns is also a near-term catalyst. Management signaled a multi-year share buyback program, targeting between $\mathbf{\$500\text{ million}}$ and $\mathbf{\$1\text{ billion}}$, which is expected to start in fiscal year 2026. That buyback will significantly boost future earnings per share, making the current forward guidance look quite conservative.