Garden supply stocks have been outperforming over the past year. This trend is likely to continue given that valuations remain favorable and the strong housing market is also supportive of people spending more on maintaining and upgrading outdoor spaces.
Another attractive feature is that these stocks tend to have high margins especially in an environment with strong demand. Many states have loosened regulations around cultivating cannabis which could be another boost as well.
Below, we provide a look at two of the top garden supply stocks: Scotts Miracle-Gro (SMG) and Toro (TTC).
Scotts Miracle-Gro (SMG)
SMG makes and markets products used in gardens and lawns. SMG categories include gardening, lawn care, hydroponics, landscaping, and more.
SMG has a C POWR Rating grade. The stock has Cs in the Stability, Sentiment, and Quality components of the POWR Ratings. If you would like to learn how SMG fares in the remaining POWR Rating components such as Momentum, Value, and Growth, you can find out by clicking here.
Of the 63 stocks in the Home Improvement & Goods space, SMG is ranked 55th. As a whole, this segment has an A POWR Ratings grade. You can find out more about stocks in this sector by clicking here.
SMG has a forward P/E ratio of 23.63, meaning the stock might be slightly overvalued. SMG has a fairly low beta of 1.15 so it shouldn’t prove too volatile in the months ahead.
Though most people are unaware of it, SMG also qualifies as a cannabis play. The company’s hydroponics equipment helps marijuana growers expedite the growth of healthy plants.
The analysts are bullish on SMG, setting an average target price of $290 for the stock. If SMG hits this level, it will have increased by nearly 34%. The highest target price for the stocks is $300 while the lowest target price is $260. Of the seven analysts who have issued recommendations for SMG, two consider it a Strong Buy, three consider it a Buy, and two consider it a Hold.
TTC is one of the world’s top providers of outdoor solutions including lawnmowers, snowblowers, irrigation systems, and outdoor lighting equipment. TTC currently trades at a forward P/E ratio of 31.56, meaning it might be a bit overpriced. TTC is trading at $111.96. The stock’s 52-week high is $118.13. TTC’s 52-week low is $63.07. TTC’s beta is particularly low at 0.78, meaning it is not volatile.
TTC has a B POWR Rating grade. The stock has Bs in the Quality, Sentiment, and Stability components of the POWR Ratings. Investors who would like to learn more about how TTC grades out in the Momentum, Value, and Growth components can do so by clicking here.
Out of more than 60 stocks in the Home Improvement & Goods stocks, TTC is ranked 12th. You can find out more about the companies in this segment by clicking here.
TTC announced its first-ever quarterly dividend in the fall of ’20. The company has an ongoing streak of solid quarterly earnings reports, meaning there is solid momentum moving forward.
The investors have established an average target price of $114 for TTC, indicating the stock has around 3% upside potential. The highest target price for the stock is $120 while the lowest target price for the stock is $108. The analysts’ average target price for TTC has increased nearly $40 across the past 50 weeks. Of the seven analysts who have issued TTC recommendations, one considers it a Strong Buy, and six consider it a Hold.
Which is the Better Play?
TTC is the better of these two stocks. TTC has a superior POWR Rating grade. TTC is ranked 12th in its segment. SMG is ranked outside of the top 50. TTC is clearly the superior investment as of June 2021.
SMG shares were trading at $202.00 per share on Thursday morning, down $5.70 (-2.74%). Year-to-date, SMG has gained 2.01%, versus a 12.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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