There are lots of companies that are one-time wonders. They experience explosive growth (or the expectation of it), plateau, and very often collapse on the weight of an overly aggressive business plan.
The marketplace is full of these types of businesses, but what’s not in great supply is a business that provides consistency—both in terms of operational growth and investment return to stockholders.
One business that falls into the category of consistent growers is The Toro Company (TTC). This is a really good enterprise operating in an industry that doesn’t mind spending money on equipment.
Toro is based in Bloomington, Minnesota and the company manufactures professional turf equipment for golf courses. Toro also makes sprinkler heads and all kinds of irrigation products for sports fields, golf courses, and home systems. The company owns the “Lawn Boy” brand. Toro is a very good business and has proven to be a very good wealth creator for investors.
The company’s medium-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
This isn’t the fastest growing enterprise in the world, but it is consistent. The company’s most recent quarter beat Wall Street consensus on earnings and revenues and management increased its full-year 2014 guidance.
According to the company, its fiscal third quarter (ended August 1, 2014) saw revenues grow a solid 11.3% to a record $567.5 million. Sales growth was driven by what management reported as strong retail demand for both its professional and residential products.
Bottom-line earnings came in at $50.0 million, or $0.87 per share, compared to $40.1 million, or $0.68 per share, the previous year, which is very good improvement.
Double-digit sales and earnings growth is a very difficult thing to come across these days, especially from a well-established, mature business.
The majority of the company’s sales come from its professional unit, which includes the sale of sprinklers, turf maintenance equipment, and other related products. Management said the company’s fiscal third quarter saw a noticeable improvement in landscape contractor demand as well as irrigation equipment for use in the agriculture sector.
The company experienced a 13% increase in its residential products business, reaching $175.7 million in its most recent quarter. Zero-turn mowers are in high demand and pre-season sales of snow removal equipment are also strong. Residential segment earnings improved 24% in the most recent quarter.
In all, the fiscal third quarter was a very good one for Toro. This business just keeps on producing, and I think this stock could make for an excellent long-term investment on a major price retrenchment.
Good businesses are just that. They are able to withstand recessions and the business cycle, provide consistent growth in revenues and earnings, and offer diversification of operations so no one business segment overly affects the rest of the enterprise.
Toro fits this bill as far as I’m concerned. The stock’s been in consolidation for most of this year after tremendous upside in 2013.
The company pays a dividend and is not expensively priced considering its margin expansion. For investors looking for a consistent grower, this enterprise is a great example of a company that has lots to offer.