CNBC’s Jim Cramer told investors on Thursday to resist the urge to add ScottsMiracle-Gro to their portfolios, despite the stock’s low valuation.
“Historically, this is a great time of year for anything garden-related, because it’s planting season and Scotts is a name we’ve gotten a lot of questions about … But, over the past thirteen months, these shares have been been deleted, “the”crazy money“said the host.
“While ScottsMiracle-Gro may seem cheap based on the price-to-earnings ratio, the problem is that earnings forecasts continue to fall … and management has no idea how bad it will go,” he added.
ScottsMiracle-Gro stock fell 6% on Thursday. The company posted better-than-expected earnings in the previous quarter two days earlier.
JP Morgan updated ScottsMiracle-Gro will move from neutral to overweight on Wednesday, indicating the stock’s valuation, high margins and market leadership. Stifel downgraded the stock from overweight to hold.
Cramer said he agrees with Stifel’s more bearish stance on Scotts, particularly due to the company’s struggles with rising raw costs, lack of confidence around a $ 8 per share earnings target, and of his concerns about the performance of Scotts’ Hawthorne division. Hawthorne operates in the cannabis industry, an industry that Cramer says has been beaten in the last year.
“Plus, Scotts has a bad enough balance sheet that we don’t even see the direction embracing an aggressive buyback. In short, business is bad and there’s not much Scotts can do to improve it,” Cramer said.
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