NEW YORK ( TheStreet) -- Scotts Miracle Gro (NYSE: SMG) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- SMG's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 39.50% is the gross profit margin for SCOTTS MIRACLE-GRO CO which we consider to be strong. Regardless of SMG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SMG's net profit margin of 10.80% compares favorably to the industry average.
- SCOTTS MIRACLE-GRO CO's earnings per share declined by 6.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SCOTTS MIRACLE-GRO CO reported lower earnings of $1.73 versus $2.93 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $1.73).
- The debt-to-equity ratio is very high at 2.49 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Even though the debt-to-equity ratio is weak, SMG's quick ratio is somewhat strong at 1.24, demonstrating the ability to handle short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, SCOTTS MIRACLE-GRO CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
-- Written by a member of TheStreet RatingsStaff