Shares of outdoor equipment company Toro (TTC, Financial) fell 10.99% after the company reported its second-quarter earnings.
Toro's revenue missed expectations, and its EPS fell short of Wall Street's estimates. Additionally, the company expects macroeconomic uncertainty to impact demand in some business segments. As a result, Toro provided a modest FY24 revenue growth forecast of 1%.
Currently trading at $81 per share, Toro (TTC, Financial) has faced significant challenges. Over the past week, the stock's performance has seen a sharp decline of 11.26%. The company has a market cap of approximately $8.41 billion and a price-to-earnings (P/E) ratio of 32.02, which is relatively high compared to the industry average.
Despite the recent downturn, there are some positive indicators. For instance, Toro's Altman Z-Score of 4.93 suggests strong financial stability, and its Beneish M-Score of -2.17 indicates it is unlikely to be a manipulator. Moreover, the company's operating margin is expanding, which is generally a good sign for profitability.
On the flip side, there are several warning signs. The P/E ratio is close to its 10-year high, and the company's revenue per share has declined over the past 12 months. Insider selling is another red flag, with one insider selling 20,000 shares over the past three months without any insider buying.
Toro's GF Score is a robust 94, indicating that the stock is reasonably valued. According to the GF Value metric, the stock appears modestly undervalued, with a GF Value of $101.66. However, its forward P/E ratio of 17.06 offers a more conservative view.
Toro's dividend growth is another bright spot, with a 10.7% growth rate over the past five years. The stock also provides a decent yield of 1.76%, supported by a payout ratio of 0.38.
While the short-term outlook remains uncertain due to macroeconomic factors, Toro’s strong financial health and modest undervaluation present a potentially attractive long-term investment opportunity.
