Scotts Miracle-Gro Company (SMG)
Profitability ratios
Return on sales
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 19.49% | 22.94% | 30.38% | 33.25% | 30.76% |
| Operating profit margin | -5.17% | -11.41% | 14.95% | 14.45% | 12.36% |
| Pretax margin | -13.44% | -14.67% | 13.90% | 12.62% | 18.27% |
| Net profit margin | -11.27% | -11.50% | 10.60% | 9.56% | 13.90% |
Based on the historical profitability ratios of Scotts Miracle-Gro Company, there are notable trends that indicate changes in the company's profitability over the years. The profitability ratios provide insights into the company's efficiency in generating profits from its operations.
Starting with the gross profit margin, which measures the percentage of revenue retained after the cost of goods sold, there has been a declining trend from 32.49% in 2019 to 23.74% in 2023. This suggests that the company's ability to control its direct costs relative to its sales revenue has diminished over the past five years. This could be attributed to various factors such as increasing raw material costs or pricing pressures in the industry.
Moving on to the operating profit margin, which assesses the company's ability to generate earnings from its core business activities, there has been a similar decreasing trend from 13.44% in 2019 to 8.21% in 2023. This indicates that Scotts Miracle-Gro is experiencing challenges in managing its operating expenses in relation to its revenue, resulting in a lower operating profitability.
The pretax margin, a measure of the company's profitability before considering the effects of taxation, shows a particularly concerning trend. The company has experienced negative pretax margins in 2020 and 2023, indicating that its expenses and losses have exceeded its pre-tax income. This suggests potential operational inefficiencies or one-time extraordinary expenses impacting the company's profitability.
Finally, the net profit margin, which indicates the percentage of revenue that translates into profit after all expenses have been deducted, also exhibits a declining trend from 14.60% in 2019 to -10.70% in 2023. This reflects the company's challenges in controlling not only its direct and operating costs but also other significant expenses, resulting in negative net profitability in the latest fiscal year.
In conclusion, the profitability ratios for Scotts Miracle-Gro Company highlight a concerning trend of declining profitability over the past five years, indicating challenges in cost management and operational efficiency. It's important for the company to address these issues and implement strategies to improve its profitability in the future.
Return on investment
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | -5.11% | -10.10% | 15.06% | 17.31% | 13.52% |
| Return on assets (ROA) | -11.13% | -10.18% | 10.68% | 11.46% | 15.21% |
| Return on total capital | -12.02% | -14.80% | 23.11% | 27.45% | 31.55% |
| Return on equity (ROE) | — | -296.21% | 50.58% | 55.57% | 64.10% |
The profitability ratios of Scotts Miracle-Gro Company provide essential insights into its financial performance over the past five years. Let's break down each of the profitability ratios to gain a comprehensive understanding of the company's profitability.
1. Operating Return on Assets (Operating ROA):
The operating return on assets measures the company's ability to generate operating income from its total assets. It decreased from 9.77% in 2022 to 8.54% in 2023. This decline could indicate inefficiencies in asset utilization or a decrease in operating income relative to the total assets employed.
2. Return on Assets (ROA):
The return on assets ratio indicates the company's ability to generate profit from its assets. Scotts Miracle-Gro Company experienced negative ROA over the past three years, with -11.13% in 2023, -10.18% in 2022, and 10.68% in 2021. The negative ROA suggests that the company's net income was insufficient to cover the total assets, indicating a potential inefficiency in asset utilization or challenges in generating profits from its assets.
3. Return on Total Capital:
The return on total capital measures the company's ability to generate returns from its total capital, including both debt and equity. The ratio declined from 13.06% in 2022 to 8.14% in 2023. This trend suggests a decrease in the company's ability to generate returns from the total capital employed, potentially indicating challenges in capital efficiency or profitability.
4. Return on Equity (ROE):
The return on equity indicates the company's ability to generate profits from shareholders' equity. Scotts Miracle-Gro Company experienced a drastic decline in ROE, from 50.58% in 2021 to -296.21% in 2022, indicating that the company's net income was insufficient to cover the shareholders' equity in 2022. This negative ROE could result from net losses or a decrease in shareholder equity.
The overall trend in profitability ratios demonstrates a decline in the company's ability to generate profit relative to its assets, total capital, and equity in the most recent year. This could be attributed to various factors such as changes in the business environment, operational inefficiencies, or shifts in the capital structure. Analyzing the underlying reasons for these changes can provide valuable insights for stakeholders and management in formulating strategies to improve profitability in the future.