The marijuana industry may have its fair share of troubles in recent months, but it should be noted that it is still a nascent industry, and the potential for growth remains immense. Moreover, many other companies will grow by providing its services to the pot industry, and one such company is Scotts Miracle-Gro Co (NYSE:SMG).
The company isn’t involved in the production of cannabis at all, but instead, it is a lawn care service provider, and for years, its products had been a major part of the home improvement industry. Later on, Scotts moved into the marijuana industry, and it could prove to be an inspired move.
The marijuana sector could grow into a $2.6 trillion sector according to seasoned industry watchers, and Scotts wants to enter the industry as a supplier of its branded hydroponic equipment. At this point in time, the company only generates 10% of its profits from the marijuana sector, but it is growing at an impressive pace. In 2019, that particular division grew by as much as 95%, and there lies the opportunity for investors. Scotts did not build the business organically but instead spent heavily on acquisitions in order to build the business, and that resulted in debts ballooning to as much as $1.9 billion by the end of 2019.
Naturally, the investors were not pleased, and the shares kept plummeting throughout 2018. However, the company has now brought its debts to manageable levels, and it far less leveraged than it used to be in the past. In addition to that, the low-interest rates at this point in time could also prove to be a massive boost to Scotts and its balance sheet. The stock is available at attractive levels at this point in time due to the wreckage in the markets due to the coronavirus crisis. If investors are looking to buy into a promising company at a fair price, then it might be time to have a closer look at Scotts.