Toro (TTC): Assessing Valuation After Revenue Miss and Lower Full-Year Outlook

If you've been watching Toro (TTC) lately, you're probably wondering what to make of the latest developments. The company just reported a drop in revenue and came in below expectations for the quarter, with consumer sales falling short and lower full-year guidance. That has certainly caught investors’ attention, as this series of disappointments has raised plenty of questions about Toro’s near-term prospects, especially when comparing its performance to other names in the agricultural machinery industry.

The pressure hasn’t gone unnoticed in Toro’s share price. The stock is down over the past month and has trailed the broader market over the last year, with momentum softening in recent months after a stretch of weaker consumer demand and downward revisions to its financial outlook. Longer-term, shareholders still remember muted returns and a slow earnings decline, underscoring potential concerns about growth durability. Continuing dividends have helped to cushion overall performance.

So with the market already reacting to mixed results and new guidance, is Toro primed for a rebound at current valuations, or is the latest weakness still being digested in the share price?

Most Popular Narrative: 17.5% Undervalued

According to the most widely followed narrative, Toro's shares are considered undervalued by a notable margin compared to their fair value estimate. The narrative builds its case around the company's progress in automation, cost optimization, and the expectation of steady financial improvements.

Ongoing investments and recent product launches in smart, connected, and autonomous turf and irrigation solutions (e.g., GeoLink Mow Autonomous Fairway Mower, TurfRad moisture sensing) directly position Toro to benefit from increasing automation in landscaping and heightened focus on water conservation. This supports future premium product revenue growth and higher net margins.

Curious how a blend of technology and strategic streamlining could be setting Toro up for a significant value surge? There is one essential financial variable in this outlook that you might not expect, and it ties back to how fast Toro can grow its profits. The entire narrative hinges on ambitious profit growth, margin expansion, and a valuation multiple that rivals top industry names. Wondering what numbers analysts have actually baked in for this future upside?

Result: Fair Value of $92.60 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in residential demand or adverse weather trends could easily reduce optimistic margin forecasts and delay any significant rebound.

Find out about the key risks to this Toro narrative.

Another Perspective: Discounted Cash Flow Tells a Similar Story

Looking beyond analyst targets, our DCF model takes a different approach and also suggests the shares are undervalued at current prices. This reinforces the previous view. However, does it make the case watertight?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Toro for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Toro Narrative

If you see things differently or enjoy putting the numbers together yourself, you can craft a Toro outlook of your own in just a few minutes. Do it your way

A great starting point for your Toro research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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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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