Buy or Sell Toro Stock?

Toro (TTC) stock has jumped 11% during the past day, and is currently trading at $80.43. We believe there are a few things to fear in TTC stock given its overall Weak operating performance and financial condition. This is aligned with the stock’s Low valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $7.9 Bil in market cap, Toro provides professional and residential turf, landscape, irrigation, and lighting equipment, including mowing, maintenance, sprinkler systems, valves, controllers, and central irrigation control solutions.

[1] Valuation Looks Low

This table highlights how TTC is valued vs broader market. For more details see: TTC Valuation Ratios

[2] Growth Is Inconsistent

• Toro has seen its top line grow at an average rate of 1.9% over the last 3 years
• Its revenues have grown 0.7% from $4.5 Bil to $4.5 Bil in the last 12 months
• Also, its quarterly revenues declined -2.2% to $1.1 Bil in the most recent quarter from $1.2 Bil a year ago.

This table highlights how TTC is growing vs broader market. For more details see: TTC Revenue Comparison

[3] Profitability Appears Moderate

• TTC last 12 month operating income was $508 Mil representing operating margin of 11.2%
• With cash flow margin of 13.0%, it generated nearly $589 Mil in operating cash flow over this period
• For the same period, TTC generated nearly $333 Mil in net income, suggesting net margin of about 7.4%

This table highlights how TTC profitability vs broader market. For more details see: TTC Operating Income Comparison

[4] Financial Stability Looks Strong

• TTC Debt was $1.1 Bil at the end of the most recent quarter, while its current Market Cap is $7.9 Bil. This implies Debt-to-Equity Ratio of 16.3%
• TTC Cash (including cash equivalents) makes up $201 Mil of $3.5 Bil in total Assets. This yields a Cash-to-Assets Ratio of 5.7%

[5] Downturn Resilience Is Weak

TTC has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• TTC stock fell 36.6% from a high of $116.51 on 7 May 2021 to $73.83 on 21 June 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $116.19 on 16 January 2023 , and currently trades at $80.43

 
2020 Covid Pandemic

• TTC stock fell 35.2% from a high of $83.75 on 16 January 2020 to $54.28 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 September 2020

 
2008 Global Financial Crisis

• TTC stock fell 67.2% from a high of $15.55 on 16 July 2007 to $5.11 on 2 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 December 2010

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read TTC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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