With a notable daily gain of 8.94% and a three-month gain of 22.07%, The Toro Co (TTC, Financial) has been drawing attention in the market. The company's Earnings Per Share (EPS) stand at $3.58. Investors are keen to understand whether these figures reflect a stock that is modestly undervalued. This article embarks on a valuation analysis to explore this question and invites readers to delve into the following comprehensive assessment of The Toro Co's intrinsic value.
Company Introduction
The Toro Co (TTC, Financial) is a leading manufacturer of turf maintenance and landscaping equipment. With a product range that includes everything from riding mowers to irrigation systems, The Toro Co caters primarily to professional users such as golf courses and sports fields. The United States serves as its largest end market. When comparing the current stock price of $97.21 to the calculated Fair Value (GF Value) of $126.26, a question arises: Is The Toro Co truly undervalued? This article aims to answer that by integrating financial analysis with key company insights.
Summarize GF Value
The GF Value is a unique valuation measure that determines the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. The GF Value Line is a visual representation of this fair value. If a stock's price is significantly above this line, it may be overvalued, implying a potentially lower future return. Conversely, if the price is below the line, the stock could be undervalued, indicating a potentially higher future return.
The Toro Co (TTC, Financial) is currently perceived to be modestly undervalued according to the GF Value, suggesting that the long-term return of its stock could outpace its business growth. With a market cap of $10.10 billion, this assessment points to a potential upside for investors.
Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. The Toro Co's cash-to-debt ratio of 0.13 ranks lower than 88.96% of its peers in the Industrial Products industry. Despite this, GuruFocus ranks its financial strength as 7 out of 10, indicating a fair balance sheet. This assessment is critical for investors considering a stake in The Toro Co.
Profitability and Growth
Profitable companies, particularly those with consistent performance, are generally safer investments. The Toro Co has maintained profitability for the past decade, with a revenue of $4.70 billion and an Earnings Per Share (EPS) of $3.58 over the last twelve months. Its operating margin of 13.45% ranks well within its industry, showcasing strong profitability with a rank of 9 out of 10.
Growth is a pivotal factor in a company's valuation. The Toro Co's 3-year average annual revenue growth of 13.8% surpasses 69.19% of competitors in the Industrial Products industry, and its EBITDA growth rate of 17.6% also stands out. These figures are promising indicators of the company's potential to create value for shareholders.
ROIC vs WACC
The comparison between a company's Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is essential for understanding its profitability. The Toro Co's ROIC of 21.33 is significantly higher than its WACC of 7.98, indicating efficient cash flow generation relative to its invested capital.
Conclusion
In conclusion, The Toro Co (TTC, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is robust. Its growth outperforms a significant portion of its industry peers. To gain a deeper understanding of The Toro Co's financials, investors can review its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
