Is Toro’s Recent Share Slide a Buying Opportunity in 2025?

If you are monitoring Toro's stock and wondering whether now is the right moment to make a move, you are not alone. With the shares resting at $74.33 after a 3.4% dip over the last seven days, questions about value and upside potential are front and center for many investors. Over the last month, Toro's stock slid 6.6%, and looking further back, the one-year and three-year changes tell a similar story, down 10.5% and 17.7% respectively. If you bought and held the past five years, you are probably feeling the sting of a 5.0% decline in that period.

Despite these declines, recent market developments suggest there is still confidence in Toro's essential role in equipment markets. However, the stock's slide could also reflect shifting investor risk perceptions or broader sector rotations, rather than trouble brewing inside the company itself. With many investors now scanning for what could spark a turnaround, it is the company's value fundamentals that are drawing more attention than ever.

What stands out right now is Toro's valuation score. Out of six key checks for undervaluation, Toro passes five, landing it a strong value score of 5. That is more than just encouraging; it puts Toro in rare company for stocks with so many valuation boxes ticked. But before simply going off the numbers, it is worth digging a little deeper into the ways experts evaluate value, and why those methods can sometimes miss a crucial part of the story, which we will reveal at the end of the article.

Why Toro is lagging behind its peers

Approach 1: Toro Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's worth by projecting its future cash flows and then discounting them back to today's value. This gives investors a sense of what the business is fundamentally worth based on the cash it is expected to generate.

Toro's latest reported Free Cash Flow stands at $464 million. Analyst forecasts expect this figure to climb steadily in coming years, projecting $527 million by 2028. Beyond that point, Simply Wall St's model extrapolates further growth in free cash flow up to $629 million by 2035. Each of these cash flows is discounted back to its value today, taking into account both the time value of money and the risk involved.

After running these projections through the DCF framework, Toro's estimated intrinsic value comes out to $91.75 per share. With the actual share price currently sitting at $74.33, this implies the stock is trading at a 19.0% discount to its underlying value.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Toro.

Our Discounted Cash Flow (DCF) analysis suggests Toro is undervalued by 19.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Toro Price vs Earnings

The Price-to-Earnings (PE) ratio is widely considered the go-to valuation measure for profitable companies like Toro. This metric gives investors a quick snapshot of how much they are paying for every dollar of the company’s current earnings, making it ideal when profits are steady and comparable across peers.

The “right” or “fair” PE ratio depends on a mix of factors, including how quickly a company is expected to grow, how risky its business model is, and what investors are paying for similar companies. Higher growth and lower risk tend to justify higher PE ratios, while slower growth or uncertainty typically means a lower ratio is reasonable.

Right now, Toro trades at a PE ratio of 21.8x. This sits just below the Machinery industry average of 24.1x and is well under the peer average of 33.4x. However, peers and industry numbers only tell part of the story. Simply Wall St’s proprietary “Fair Ratio” method goes deeper by crunching data on Toro’s growth outlook, profit margins, risk factors, industry setting, and market cap. The Fair Ratio for Toro is 23.5x, which represents what would be considered a justifiable PE in today’s market for a company with Toro’s characteristics.

Comparing all these points, Toro’s actual PE of 21.8x is within a reasonable range of the Fair Ratio of 23.5x. This suggests Toro’s shares are priced about right for its current earnings power and outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Toro Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the story behind your view of Toro, an explanation for why you think the company's future looks bright (or not), summed up in your own assumptions for fair value, future revenue, earnings, and margins.

Rather than just looking at numbers in isolation, Narratives help you tie Toro's unique business story, such as bold investments in automation or challenges from shifting residential demand, to a specific financial forecast and fair value. You can easily create or follow Narratives directly on the Simply Wall St Community page, where millions of investors share and update their perspectives alongside live company data.

Narratives make it easy to decide what action to take: by comparing the Fair Value from your Narrative to the current price, you can quickly see if Toro is a buy, sell, or hold in your eyes. Best of all, these Narratives respond dynamically as new events unfold, whether it's a surprise earnings report or a major product launch.

For Toro, for example, recent Narratives range from very optimistic, assuming automation and water conservation will rapidly boost revenue and set a fair value near $92.60, to much more cautious, with some investors focusing on weak residential demand and setting fair values close to $74. This shows just how perspectives can differ.

Do you think there's more to the story for Toro? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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