Scotts Miracle-Gro SMG stock soared around 200% during a two-plus year stretch on the back of its exposure to the growing legal marijuana business in North America. The lawn care products firm has since tumbled about 30% from its early April records.

Let’s quickly dive into SMG ahead of its upcoming Q3 earnings report on August 4 to see if it might be worth buying.

Home Projects & Marijuana Exposure

Scotts Miracle-Gro is a consumer lawn and garden products powerhouse that operates under both The Company’s Scotts and Miracle-Gro brands, as well as Ortho. Wall Street has also grew enamored with its Hawthorne Gardening segment, which is a leader in the hydroponic industry. This helps Scotts Miracle-Gro gain huge exposure to the growing marijuana market.

The company’s hydroponic space helped SMG achieve strong top-line expansion over the past two years, with FY19 revenue up 19% and fiscal 2020 sales 31% higher.

Its Hawthorne segment stands to benefit for years if not decades to come as part of the broader push for marijuana legalization in the U.S. and beyond. The hydroponic industry also has legs within the broader indoor farming market that’s poised to catch on in cities and other areas where traditional outdoor agriculture is difficult or impossible.

Scotts Miracle-Gro also benefitted from increased home improvement spending, alongside the likes of Home Depot HD, Lowe’s LOW, RH RH, and many others. The housing market is still hot and people are spending more time at home, while craving more space, which often means bigger yards.

Image Source: Zacks Investment Research

What Else

Last quarter, Hawthorne sales surged another 66%, with its total Q2 FY21 revenue up 32%. “Consumers told us entering the season that they intended to stay engaged with lawn and garden and, so far, that is exactly what they are doing,” CEO Jim Hagedorn said in prepared remarks last quarter.

“We also continue to exceed expectations at Hawthorne as we reported our fifth consecutive quarter of sales growth in excess of 60 percent and another month of strong results in April. Given the current momentum of this business, we feel comfortable once again increasing our sales guidance for Hawthorne to a range of 30 to 40 percent growth on a fiscal year basis.”

Management did announce plans to raise prices to help offset what it called “continued commodity pressure.” On top of higher prices, the company is now coming up against some difficult to compare periods after two years of big growth. With this in mind, Zacks estimates call for its Q3 revenue to come in marginally lower vs. the prior-year quarter, with adjusted earnings set to dip 9% to $3.45 a share.