Intrinsic value of Scotts Miracle-Gro - SMG

Previous Close

$91.55

  Intrinsic Value

$574.29

stock screener

  Rating & Target

str. buy

+527%

Previous close

$91.55

 
Intrinsic value

$574.29

 
Up/down potential

+527%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of SMG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Scotts Miracle-Gro (SMG) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.43
  58.30
  52.97
  48.17
  43.86
  39.97
  36.47
  33.33
  30.49
  27.94
  25.65
  23.58
  21.73
  20.05
  18.55
  17.19
  15.97
  14.88
  13.89
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
Revenue, $m
  2,642
  4,182
  6,398
  9,480
  13,637
  19,088
  26,049
  34,731
  45,321
  57,986
  72,859
  90,042
  109,605
  131,584
  155,991
  182,811
  212,013
  243,553
  277,380
  313,440
  351,679
  392,052
  434,520
  479,053
  525,636
  574,265
  624,952
  677,721
  732,613
  789,679
  848,988
Variable operating expenses, $m
 
  3,412
  5,196
  7,678
  11,026
  15,415
  21,021
  28,012
  36,540
  46,738
  58,715
  72,508
  88,261
  105,961
  125,615
  147,212
  170,728
  196,126
  223,366
  252,404
  283,197
  315,708
  349,906
  385,767
  423,279
  462,439
  503,255
  545,749
  589,951
  635,905
  683,665
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,209
  3,412
  5,196
  7,678
  11,026
  15,415
  21,021
  28,012
  36,540
  46,738
  58,715
  72,508
  88,261
  105,961
  125,615
  147,212
  170,728
  196,126
  223,366
  252,404
  283,197
  315,708
  349,906
  385,767
  423,279
  462,439
  503,255
  545,749
  589,951
  635,905
  683,665
Operating income, $m
  433
  770
  1,202
  1,802
  2,611
  3,673
  5,028
  6,719
  8,781
  11,247
  14,144
  17,534
  21,343
  25,623
  30,376
  35,599
  41,285
  47,427
  54,014
  61,036
  68,482
  76,344
  84,614
  93,286
  102,357
  111,826
  121,697
  131,973
  142,661
  153,774
  165,323
EBITDA, $m
  513
  908
  1,390
  2,059
  2,962
  4,146
  5,658
  7,544
  9,844
  12,595
  15,825
  19,558
  23,807
  28,581
  33,882
  39,707
  46,050
  52,901
  60,248
  68,081
  76,386
  85,156
  94,380
  104,052
  114,170
  124,733
  135,742
  147,204
  159,127
  171,522
  184,404
Interest expense (income), $m
  70
  68
  129
  217
  339
  504
  720
  996
  1,341
  1,761
  2,263
  2,853
  3,535
  4,311
  5,183
  6,151
  7,215
  8,374
  9,625
  10,967
  12,398
  13,915
  15,516
  17,201
  18,968
  20,816
  22,745
  24,756
  26,849
  29,027
  31,290
Earnings before tax, $m
  315
  702
  1,073
  1,585
  2,272
  3,169
  4,308
  5,722
  7,440
  9,486
  11,880
  14,680
  17,808
  21,312
  25,193
  29,447
  34,070
  39,053
  44,389
  50,069
  56,085
  62,430
  69,098
  76,085
  83,389
  91,011
  98,952
  107,217
  115,813
  124,747
  134,033
Tax expense, $m
  117
  190
  290
  428
  613
  856
  1,163
  1,545
  2,009
  2,561
  3,208
  3,964
  4,808
  5,754
  6,802
  7,951
  9,199
  10,544
  11,985
  13,519
  15,143
  16,856
  18,656
  20,543
  22,515
  24,573
  26,717
  28,949
  31,269
  33,682
  36,189
Net income, $m
  218
  513
  783
  1,157
  1,659
  2,313
  3,145
  4,177
  5,431
  6,925
  8,673
  10,717
  13,000
  15,558
  18,391
  21,497
  24,871
  28,509
  32,404
  36,550
  40,942
  45,574
  50,441
  55,542
  60,874
  66,438
  72,235
  78,268
  84,543
  91,066
  97,844

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  121
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,747
  4,157
  6,359
  9,423
  13,556
  18,974
  25,894
  34,524
  45,051
  57,640
  72,424
  89,505
  108,951
  130,799
  155,060
  181,720
  210,748
  242,101
  275,726
  311,570
  349,582
  389,714
  431,928
  476,196
  522,501
  570,840
  621,225
  673,679
  728,243
  784,969
  843,924
Adjusted assets (=assets-cash), $m
  2,626
  4,157
  6,359
  9,423
  13,556
  18,974
  25,894
  34,524
  45,051
  57,640
  72,424
  89,505
  108,951
  130,799
  155,060
  181,720
  210,748
  242,101
  275,726
  311,570
  349,582
  389,714
  431,928
  476,196
  522,501
  570,840
  621,225
  673,679
  728,243
  784,969
  843,924
Revenue / Adjusted assets
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
  1.006
Average production assets, $m
  1,176
  1,861
  2,847
  4,218
  6,068
  8,494
  11,592
  15,455
  20,168
  25,804
  32,422
  40,069
  48,774
  58,555
  69,416
  81,351
  94,346
  108,381
  123,434
  139,481
  156,497
  174,463
  193,361
  213,178
  233,908
  255,548
  278,104
  301,586
  326,013
  351,407
  377,800
Working capital, $m
  337
  569
  870
  1,289
  1,855
  2,596
  3,543
  4,723
  6,164
  7,886
  9,909
  12,246
  14,906
  17,895
  21,215
  24,862
  28,834
  33,123
  37,724
  42,628
  47,828
  53,319
  59,095
  65,151
  71,486
  78,100
  84,993
  92,170
  99,635
  107,396
  115,462
Total debt, $m
  1,401
  2,433
  4,092
  6,399
  9,510
  13,590
  18,801
  25,299
  33,226
  42,706
  53,838
  66,700
  81,343
  97,795
  116,063
  136,138
  157,997
  181,605
  206,925
  233,915
  262,538
  292,758
  324,545
  357,878
  392,746
  429,146
  467,085
  506,584
  547,670
  590,385
  634,778
Total liabilities, $m
  2,098
  3,130
  4,789
  7,096
  10,207
  14,287
  19,498
  25,996
  33,923
  43,403
  54,535
  67,397
  82,040
  98,492
  116,760
  136,835
  158,694
  182,302
  207,622
  234,612
  263,235
  293,455
  325,242
  358,575
  393,443
  429,843
  467,782
  507,281
  548,367
  591,082
  635,475
Total equity, $m
  649
  1,027
  1,571
  2,327
  3,348
  4,687
  6,396
  8,527
  11,128
  14,237
  17,889
  22,108
  26,911
  32,307
  38,300
  44,885
  52,055
  59,799
  68,104
  76,958
  86,347
  96,259
  106,686
  117,620
  129,058
  140,997
  153,442
  166,399
  179,876
  193,887
  208,449
Total liabilities and equity, $m
  2,747
  4,157
  6,360
  9,423
  13,555
  18,974
  25,894
  34,523
  45,051
  57,640
  72,424
  89,505
  108,951
  130,799
  155,060
  181,720
  210,749
  242,101
  275,726
  311,570
  349,582
  389,714
  431,928
  476,195
  522,501
  570,840
  621,224
  673,680
  728,243
  784,969
  843,924
Debt-to-equity ratio
  2.159
  2.370
  2.600
  2.750
  2.840
  2.900
  2.940
  2.970
  2.990
  3.000
  3.010
  3.020
  3.020
  3.030
  3.030
  3.030
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.040
  3.050
Adjusted equity ratio
  0.201
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  218
  513
  783
  1,157
  1,659
  2,313
  3,145
  4,177
  5,431
  6,925
  8,673
  10,717
  13,000
  15,558
  18,391
  21,497
  24,871
  28,509
  32,404
  36,550
  40,942
  45,574
  50,441
  55,542
  60,874
  66,438
  72,235
  78,268
  84,543
  91,066
  97,844
Depreciation, amort., depletion, $m
  80
  138
  188
  257
  351
  473
  630
  825
  1,063
  1,347
  1,682
  2,024
  2,463
  2,957
  3,506
  4,109
  4,765
  5,474
  6,234
  7,044
  7,904
  8,811
  9,766
  10,767
  11,814
  12,906
  14,046
  15,232
  16,465
  17,748
  19,081
Funds from operations, $m
  380
  651
  971
  1,414
  2,009
  2,786
  3,775
  5,002
  6,494
  8,272
  10,354
  12,740
  15,463
  18,515
  21,897
  25,605
  29,636
  33,983
  38,638
  43,595
  48,846
  54,385
  60,207
  66,309
  72,688
  79,344
  86,281
  93,500
  101,008
  108,814
  116,925
Change in working capital, $m
  26
  209
  301
  419
  565
  741
  947
  1,181
  1,440
  1,722
  2,023
  2,337
  2,661
  2,989
  3,319
  3,648
  3,971
  4,289
  4,600
  4,904
  5,201
  5,491
  5,776
  6,057
  6,335
  6,614
  6,893
  7,177
  7,465
  7,761
  8,066
Cash from operations, $m
  354
  441
  670
  995
  1,444
  2,045
  2,828
  3,821
  5,054
  6,550
  8,331
  10,403
  12,803
  15,526
  18,577
  21,958
  25,664
  29,693
  34,038
  38,691
  43,645
  48,894
  54,432
  60,252
  66,352
  72,731
  79,387
  86,323
  93,543
  101,052
  108,859
Maintenance CAPEX, $m
  0
  -59
  -94
  -144
  -213
  -306
  -429
  -585
  -781
  -1,019
  -1,303
  -1,637
  -2,024
  -2,463
  -2,957
  -3,506
  -4,109
  -4,765
  -5,474
  -6,234
  -7,044
  -7,904
  -8,811
  -9,766
  -10,767
  -11,814
  -12,906
  -14,046
  -15,232
  -16,465
  -17,748
New CAPEX, $m
  -70
  -685
  -986
  -1,371
  -1,850
  -2,426
  -3,098
  -3,863
  -4,713
  -5,636
  -6,618
  -7,647
  -8,705
  -9,781
  -10,861
  -11,935
  -12,995
  -14,035
  -15,053
  -16,046
  -17,017
  -17,966
  -18,898
  -19,817
  -20,729
  -21,640
  -22,556
  -23,482
  -24,427
  -25,395
  -26,392
Cash from investing activities, $m
  22
  -744
  -1,080
  -1,515
  -2,063
  -2,732
  -3,527
  -4,448
  -5,494
  -6,655
  -7,921
  -9,284
  -10,729
  -12,244
  -13,818
  -15,441
  -17,104
  -18,800
  -20,527
  -22,280
  -24,061
  -25,870
  -27,709
  -29,583
  -31,496
  -33,454
  -35,462
  -37,528
  -39,659
  -41,860
  -44,140
Free cash flow, $m
  376
  -303
  -410
  -520
  -619
  -687
  -699
  -627
  -439
  -104
  410
  1,119
  2,074
  3,282
  4,759
  6,517
  8,561
  10,893
  13,511
  16,410
  19,584
  23,024
  26,722
  30,669
  34,857
  39,277
  43,925
  48,795
  53,885
  59,193
  64,718
Issuance/(repayment) of debt, $m
  52
  1,153
  1,658
  2,307
  3,112
  4,080
  5,211
  6,498
  7,927
  9,479
  11,133
  12,862
  14,643
  16,452
  18,268
  20,075
  21,858
  23,608
  25,320
  26,991
  28,623
  30,219
  31,787
  33,333
  34,868
  36,400
  37,940
  39,498
  41,087
  42,715
  44,393
Issuance/(repurchase) of shares, $m
  -235
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -180
  1,153
  1,658
  2,307
  3,112
  4,080
  5,211
  6,498
  7,927
  9,479
  11,133
  12,862
  14,643
  16,452
  18,268
  20,075
  21,858
  23,608
  25,320
  26,991
  28,623
  30,219
  31,787
  33,333
  34,868
  36,400
  37,940
  39,498
  41,087
  42,715
  44,393
Total cash flow (excl. dividends), $m
  198
  850
  1,248
  1,787
  2,493
  3,393
  4,512
  5,871
  7,488
  9,375
  11,542
  13,981
  16,717
  19,734
  23,028
  26,592
  30,419
  34,501
  38,831
  43,401
  48,207
  53,244
  58,509
  64,003
  69,724
  75,677
  81,865
  88,294
  94,972
  101,907
  109,112
Retained Cash Flow (-), $m
  66
  -378
  -544
  -757
  -1,021
  -1,338
  -1,709
  -2,131
  -2,600
  -3,109
  -3,652
  -4,219
  -4,803
  -5,397
  -5,992
  -6,585
  -7,170
  -7,744
  -8,305
  -8,854
  -9,389
  -9,913
  -10,427
  -10,934
  -11,437
  -11,940
  -12,445
  -12,956
  -13,477
  -14,011
  -14,562
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  473
  704
  1,030
  1,472
  2,055
  2,802
  3,739
  4,887
  6,266
  7,891
  9,762
  11,913
  14,337
  17,035
  20,007
  23,249
  26,757
  30,525
  34,548
  38,818
  43,331
  48,083
  53,069
  58,287
  63,737
  69,420
  75,337
  81,494
  87,896
  94,550
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  435
  592
  785
  1,007
  1,250
  1,500
  1,743
  1,960
  2,135
  2,255
  2,308
  2,295
  2,216
  2,078
  1,892
  1,673
  1,436
  1,197
  969
  760
  578
  426
  304
  210
  140
  90
  56
  34
  19
  11
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Scotts Miracle-Gro Company (Scotts Miracle-Gro) is a manufacturer and marketer of branded consumer lawn and garden products. The Company's segments include Global Consumer. In North America, its brands include Scotts and Turf Builder lawn and grass seed products; Miracle-Gro, Nature's Care, Scotts, LiquaFeed and Osmocote gardening and landscape products; and Ortho, Roundup, Home Defense and Tomcat branded insect control, weed control and rodent control products. In the United Kingdom, its brands include Miracle-Gro plant fertilizers; Roundup, Weedol and Pathclear herbicides; EverGreen lawn fertilizers, and Levington gardening and landscape products.

FINANCIAL RATIOS  of  Scotts Miracle-Gro (SMG)

Valuation Ratios
P/E Ratio 24.4
Price to Sales 2
Price to Book 8.2
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow 18.7
Growth Rates
Sales Growth Rate 5.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.7%
Cap. Spend. - 3 Yr. Gr. Rate -4.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 193.8%
Total Debt to Equity 215.9%
Interest Coverage 6
Management Effectiveness
Return On Assets 9.5%
Ret/ On Assets - 3 Yr. Avg. 10.4%
Return On Total Capital 11%
Ret/ On T. Cap. - 3 Yr. Avg. 12.7%
Return On Equity 32%
Return On Equity - 3 Yr. Avg. 35.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 36.8%
Gross Margin - 3 Yr. Avg. 35.8%
EBITDA Margin 17.6%
EBITDA Margin - 3 Yr. Avg. 17.2%
Operating Margin 16.4%
Oper. Margin - 3 Yr. Avg. 15%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 37.1%
Eff/ Tax Rate - 3 Yr. Avg. 36.7%
Payout Ratio 58.7%

SMG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMG stock intrinsic value calculation we used $2642 million for the last fiscal year's total revenue generated by Scotts Miracle-Gro. The default revenue input number comes from 2017 income statement of Scotts Miracle-Gro. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SMG stock valuation model: a) initial revenue growth rate of 58.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.6%, whose default value for SMG is calculated based on our internal credit rating of Scotts Miracle-Gro, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Scotts Miracle-Gro.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SMG stock the variable cost ratio is equal to 82.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SMG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.3% for Scotts Miracle-Gro.

Corporate tax rate of 27% is the nominal tax rate for Scotts Miracle-Gro. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SMG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SMG are equal to 44.5%.

Life of production assets of 19.8 years is the average useful life of capital assets used in Scotts Miracle-Gro operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SMG is equal to 13.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $649 million for Scotts Miracle-Gro - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 56.36 million for Scotts Miracle-Gro is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Scotts Miracle-Gro at the current share price and the inputted number of shares is $5.2 billion.

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Financial statements of SMG
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