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Today I will take a look at The Toro Company’s (NYSE:TTC) most recent earnings update (31 October 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the machinery industry performed. As an investor, I find it beneficial to assess TTC’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did TTC perform better than its track record and industry?
TTC’s trailing twelve-month earnings (from 31 October 2018) of US$272m has increased by 1.6% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 12%, indicating the rate at which TTC is growing has slowed down. Why could this be happening? Well, let’s look at what’s going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Toro has invested its equity funds well leading to a 41% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 18% exceeds the US Machinery industry of 6.7%, indicating Toro has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Toro’s debt level, has increased over the past 3 years from 35% to 36%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 62% to 47% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Toro gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Toro to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TTC’s future growth? Take a look at our free research report of analyst consensus for TTC’s outlook.
- Financial Health: Are TTC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 October 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.