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1. Company Snapshot

1.a. Company Description

Hydrofarm Holdings Group, Inc., together with its subsidiaries, engages in the manufacture and distribution of controlled environment agriculture (CEA) equipment and supplies in the United States and Canada.The company offers agricultural lighting devices, indoor climate control equipment, hydroponics and nutrients, and plant additives used to grow, farm, and cultivate cannabis, flowers, fruits, plants, vegetables, grains, and herbs in controlled environment; and distributes CEA equipment and supplies, which include grow light systems; heating, ventilation, and air conditioning systems; humidity and carbon dioxide monitors and controllers; water pumps, heaters, chillers, and filters; nutrient and fertilizer delivery systems; and various growing media made from soil, rock wool or coconut fiber.It also provides hydroponics systems, such as hydro systems, hydro trays and components, meters and solutions, pumps and irrigation systems, water filtration systems, pots and containers, and tents and tarps; atmospheric control equipment comprising controllers, monitors and timers, ventilation/air conditioning equipment, air purification equipment, and CO2 equipment; and nutrients and additives.


The company offers its products under the Phantom, PhotoBio, Active Aqua, Active Air, HEAVY 16, House & Garden, Mad Farmer, Roots Organics, Soul, Procision, Grotek, Gaia Green, Innovative Growers Equipment, Quantum, Xtrasun, Digilux, Agrobrite, SunBlaster, Jump Start, Active Eye, Autopilot, Phat, oxyClone, and GROW!T brands.Hydrofarm Holdings Group, Inc.was founded in 1977 and is based in Shoemakersville, Pennsylvania.

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1.b. Last Insights on HYFM

Hydrofarm Holdings Group's recent performance was negatively driven by a Q4 loss of $3.80 per share, exceeding the Zacks Consensus Estimate of a loss of $2.80. The company's earnings fell short of expectations, with a year-over-year decline in earnings per share. Additionally, Hydrofarm's revenue missed estimates, indicating softness in sales. These disappointing results, following a recent reverse stock split, have raised concerns about the company's financial health and growth prospects. Furthermore, the industry's uncertain near-term outlook, influenced by regulatory challenges and market conditions, may continue to impact Hydrofarm's performance.

1.c. Company Highlights

2. Hydrofarm's Q2 2025 Earnings: Navigating Industry Oversupply and Restructuring

Hydrofarm Holdings Group reported a decline in net sales by 28.4% year-over-year to $39.2 million, primarily due to industry oversupply and lower performance in durable lighting and equipment products. The company's adjusted gross profit margin was 19.2%, and the actual EPS came out at '-3.63' relative to estimates at '-2.39'. Despite the challenges, Hydrofarm delivered its 12th consecutive quarter of year-over-year adjusted SG&A savings, with a 16% reduction in adjusted SG&A expenses.

Publication Date: Aug -23

📋 Highlights
  • Net Sales Decline:: Q2 2025 net sales fell 28.4% YoY to $39.2 million, driven by industry oversupply and weaker durable product performance.
  • SG&A Savings:: 12th consecutive quarter of adjusted SG&A reductions, with a 16% year-over-year expense cut.
  • Restructuring Plan:: Aims for >$3 million annual cost savings by rationalizing over one-third of SKUs and optimizing operations.
  • Adjusted Gross Profit:: Maintained at $7.5 million (19.2% of net sales), despite $3.3 million restructuring charges.
  • Liquidity Strength:: $11 million cash balance and $20 million total liquidity, with expected positive free cash flow for Q3–Q4 2025.

Restructuring Efforts and Cost Savings

The company has initiated a restructuring plan aimed at optimizing its product portfolio and manufacturing and distribution network. This plan is expected to result in annual cost savings of over $3 million and working capital benefits. The restructuring includes rationalizing over one-third of SKUs and brands in its product portfolio, primarily in the durable products and distributed brand areas. As B. John Lindeman mentioned, "the company needs to trim in certain areas to optimize performance," highlighting the importance of this restructuring effort.

International Sales and Diversification

Hydrofarm's international sales have performed well, with significant growth in select European and Asian countries. The company is focusing on diversification efforts through international sales, food and floral sales in the U.S. and Canada, Garden Center, and e-commerce. They've had success modifying products to appeal to non-cannabis markets, which is expected to improve the company's proprietary brand mix and adjusted gross profit margin for the full year 2025.

Valuation and Financial Health

With a cash balance of $11 million and total liquidity of $20 million, Hydrofarm's balance sheet and liquidity position remain strong. The company expects to deliver positive free cash flow for the last 9 months of 2025. Considering the current valuation metrics, the P/S Ratio stands at 0.13, and the EV/EBITDA is -5.39, indicating that the market has already priced in the challenges faced by the company. Analysts estimate next year's revenue growth at 37.3%, which could potentially lead to a revaluation of the stock.

Outlook and Regulatory Environment

The company is managing its business to minimize impacts from tariffs and is carefully purchasing from vendors abroad. Regarding the potential reclassification of cannabis, Lindeman expressed encouragement but caution, stating that while the latest developments seem positive, there have been stops and starts in the past. If successful, rescheduling cannabis would be a positive for the industry, freeing up capital and cash flow for end-users of their products.

3. NewsRoom

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Hydrofarm Holdings Group, Inc. (HYFM) Reports Q3 Loss, Misses Revenue Estimates

Nov -12

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Hydrofarm Holdings Group Announces Third Quarter 2025 Results

Nov -12

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Hydrofarm Holdings Group, Inc. to Announce Third Quarter 2025 Results on November 12, 2025

Nov -06

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Here Are A Few Ways Marijuana Stocks Can Make You Money

Oct -31

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3 Best Ancillary Cannabis Stocks for Investors to Watch This Week

Oct -12

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Hydrofarm Announces Changes to its Board of Directors

Oct -02

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Oct -01

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Sep -20

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

Controlled Environment Agriculture Equipment and Supplies

Expected Growth: 1.0%

Increasing demand for sustainable and locally grown produce, government initiatives promoting vertical farming, and rising adoption of hydroponics and aeroponics drive growth in Controlled Environment Agriculture Equipment and Supplies from Hydrofarm Holdings Group, Inc.

7. Detailed Products

Grow Lights

Hydrofarm offers a wide range of grow lights, including LED, HPS, and CFL options, designed to provide optimal lighting for plants at various growth stages.

Climate Control Systems

Hydrofarm's climate control systems regulate temperature, humidity, and CO2 levels to create an optimal environment for plant growth.

Nutrients and Fertilizers

Hydrofarm offers a variety of nutrients and fertilizers, including organic and synthetic options, to promote healthy plant growth and development.

Irrigation Systems

Hydrofarm's irrigation systems provide efficient and effective watering solutions for plants, including drip irrigation, sprinkler systems, and more.

Pest Control and Repellents

Hydrofarm offers a range of pest control and repellent products to protect plants from pests and diseases.

Grow Media and Soil

Hydrofarm provides a variety of grow media and soil options, including coco coir, rockwool, and peat moss, for optimal plant growth.

Propagation and Cloning

Hydrofarm's propagation and cloning products, including cloning gels and rooting hormones, help promote healthy root development and plant growth.

Trellising and Support

Hydrofarm's trellising and support products, including stakes, trellises, and cages, help train and support plants as they grow.

8. Hydrofarm Holdings Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Hydrofarm Holdings Group, Inc. faces moderate threat from substitutes due to the availability of alternative products and services in the agricultural industry.

Bargaining Power Of Customers

Hydrofarm Holdings Group, Inc. has a diverse customer base, which reduces the bargaining power of individual customers, giving the company an upper hand in negotiations.

Bargaining Power Of Suppliers

Hydrofarm Holdings Group, Inc. relies on a few key suppliers for its raw materials, giving them some bargaining power, but the company's size and scale also give it negotiating power.

Threat Of New Entrants

The agricultural industry is relatively easy to enter, and new entrants can quickly gain market share, posing a significant threat to Hydrofarm Holdings Group, Inc.'s market position.

Intensity Of Rivalry

The agricultural industry is highly competitive, with many established players, leading to intense rivalry and competition for market share among companies like Hydrofarm Holdings Group, Inc.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 30.53%
Debt Cost 8.42%
Equity Weight 69.47%
Equity Cost 13.59%
WACC 12.01%
Leverage 43.94%

11. Quality Control: Hydrofarm Holdings Group, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Astec Industries

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Growth: 3.4

Quality: 5.7

Yield: 2.0

Momentum: 8.5

Volatility: 5.7

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A-Score: 4.4/10

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Quality: 4.3

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A-Score: 3.8/10

Value: 4.6

Growth: 4.7

Quality: 3.5

Yield: 0.0

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Titan International

A-Score: 3.7/10

Value: 6.6

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Yield: 0.0

Momentum: 6.0

Volatility: 2.7

1-Year Total Return ->

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Hydrofarm Holdings

A-Score: 2.8/10

Value: 10.0

Growth: 2.3

Quality: 2.7

Yield: 0.0

Momentum: 1.0

Volatility: 1.0

1-Year Total Return ->

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A-Score: 2.5/10

Value: 9.0

Growth: 3.1

Quality: 2.9

Yield: 0.0

Momentum: 0.0

Volatility: 0.0

1-Year Total Return ->

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.81$

Current Price

1.81$

Potential

-0.00%

Expected Cash-Flows