Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. 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 good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Net operating cash flow has increased to -$376.70 million or 10.15% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.56%.
- SCOTTS MIRACLE-GRO CO's earnings per share declined by 21.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SCOTTS MIRACLE-GRO CO increased its bottom line by earning $1.78 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.55 versus $1.78).
- SMG, with its decline in revenue, underperformed when compared the industry average of 0.7%. Since the same quarter one year prior, revenues fell by 12.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 38.60% 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 9.80% is significantly lower than the industry average.
- In its most recent trading session, SMG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff