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TTC STOCK WRITE UP


TTC (THE TORO COMPANY)

  • P/E: 31.6
  • GAAP DILUTED YEAR-OVER-YEAR EPS GROWTH LAST QUARTER: $.06
  • SECTOR: PRODUCER MANUFACTURING
  • ASSETS-LIABILITIES: 2.8
  • DIVIDEND: 1.05%

TTC is the symbol for Toro, a manufacturer of lawnmowers, irrigation and lighting systems, and other tools for residential and professional landscaping. They utilize high-quality products and deliver them in a reliable package to their customers. Toro reports 5/25/17, and will attempt to demonstrate business growth in line with expectations.
In the most recent quarter, Toro reported a 6% boost in revenue and an increase in operating costs by just under 6%. The company utilized some of its 35% increase in cash to repurchase stock. Inventories and receivables were cut on a year-over-year basis, signifying that the company is fulfilling orders more rapidly. Professional services make up the bulk of the company's revenue at approximately 80%. While residential revenue decreased on a year-over-year basis, the professional services increased.
Richard Olson is Toro's CEO, newly appointed 11/1/16. He has been with the company since 1986 as an engineer. He has a BS and an MBA. On 11/3/16, Toro acquired a German irrigation products brand based to expand international exposure. I know from my experience in landscaping that Toro makes reliable equipment utilizing high-quality Briggs and Stratton motors. The company has a good reputation in the industry, and if Richard Olson can keep up quality while expanding the business, consensus expectations will rise. Analysts have a median PT of $61.5, while the share price has risen nearly 20% since the beginning of 2017, and 50% since 5/2016.
Toro has a P/E of approximately 32, higher than its chief competitor John Deere at 27. While Deere has reported shrinking revenues in recent years, Toro's revenue is growing. Should its growth rate remain constant over 2017, it will be trading at around 30 p/e. Given that the company is growing, share price has risen with the expectation of continued growth, and if its competitor trades at 27 with its decline in revenue, then expectations may continue to drive Toro higher. When the company reports 5/25/17, it will attempt to confirm the thesis that the company is increasing its revenue through virtue of its reliable, and high-performing products.








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