Despite a daily loss of 14.21% and a 3-month decline of 16.88%, The Toro Co (TTC, Financial) boasts an impressive Earnings Per Share (EPS) (EPS) of 4.91. With such a performance, the question arises: is the stock significantly undervalued? The following analysis, grounded on the company's financial metrics and market trends, will provide an answer. Keep reading to gain valuable insights into the intrinsic value of The Toro Co.
Company Introduction
The Toro Co (TTC, Financial), a leading manufacturer of turf maintenance and landscaping equipment, has a rich history of producing products for professional turf and landscape maintenance and construction. With its products marketed through a network of distributors and dealers, The Toro Co primarily caters to professional users maintaining turfs and sports fields such as golf courses. Its largest end market is the United States.
The company's stock price currently stands at $85.56, while its GF Value, an estimate of the fair value, is $127.69. With a market cap of $8.90 billion, the stock appears to be significantly undervalued. This initial comparison sets the stage for a more detailed exploration of the company's value.
Summarizing GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
Based on the GF Value calculation, The Toro Co (TTC, Financial) stock appears to be significantly undervalued. At its current price of $85.56 per share, the future return of the stock is likely to be much higher than its business growth, given its significant undervaluation.
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Financial Strength
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Examining the cash-to-debt ratio and interest coverage can provide a useful snapshot of a company's financial health. The Toro Co's cash-to-debt ratio stands at 0.14, which is lower than 88.36% of 2791 companies in the Industrial Products industry. However, its overall financial strength is rated 7 out of 10, indicating a fair financial condition.
Profitability and Growth
Companies that have consistently shown profitability over the long term offer less risk to investors. The Toro Co has been profitable 10 times over the past 10 years. In the past twelve months, the company had a revenue of $4.80 billion and an EPS of $4.91. Its operating margin is 13.87%, ranking better than 80.21% of 2799 companies in the Industrial Products industry. This strong profitability is ranked 10 out of 10.
Growth is a crucial factor in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The Toro Co's average annual revenue growth is 13.8%, which is higher than 70.02% of 2672 companies in the Industrial Products industry. Its 3-year average EBITDA growth is 17.6%, ranking better than 64.11% of 2363 companies in the same industry.
ROIC Vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to assess its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business, while the WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. For the past 12 months, The Toro Co's ROIC is 22.4, and its WACC is 7.73.
Conclusion
In conclusion, The Toro Co (TTC, Financial) stock appears to be significantly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 64.11% of 2363 companies in the Industrial Products industry. To learn more about The Toro Co stock, you can check out its 30-Year Financials here.
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