Cutting the grass is a pain in the . well, you know what. And leave it to me to make it even harder on myself, choosing to use a modern version of those old-style unpowered jobs instead of a new and likely more convenient Toro (NYSE: TTC ) .
But that's part of what's funny about Toro. The residential business still matters, but not nearly as much as most casual investors might think. The real money in this model is made on the professional side, where the sales are larger and growing faster and the profit margins are higher.
And although the year-ago period was fairly strong, Toro managed to deliver an earnings report that was just "all right." Sales rose about 5%, and operating income rose 9% -- meaning that operating margins expanded once again. Sales growth was led by the professional business (up almost 13%), while the residential business was down nearly 8%, as good sales of riding mowers couldn't compensate with an inventory reduction at a retailer -- and I'm assuming this retailer was Home Depot (NYSE: HD ) .
Toro is an odd company. It's smaller than you might think, with about $2 billion in market cap, yet it has a return on invested capital that's pretty good for any company -- let alone a company that makes durable goods like mowers and landscaping equipment.
And it also seems to have one other advantage: focus. Sure, the company has formidable competitors like Deere (NYSE: DE ) , Textron (NYSE: TXT ) , Electrolux, and Honda (NYSE: HMC ) , but Toro's markets are mostly just second (or third) thoughts to these companies. So although Toro may compete with some giants, those giants seem to be somewhat distracted.
I can't say, though, that I have especially strong feelings about the stock today. It's not cheap enough to entice a non-owner like me, but it's certainly not so expensive as to make me think that today's holders should sell.
Home Depot is a Motley Fool Inside Value recommendation. If you're interested in other established stalwarts that can be had at a significant discount, try a free 30-day guest pass to the newsletter. This gives you access to all of Philip Durell's picks, as well as updates and analysis for each one. Inside Value has returned an average of almost 9% to subscribers since its inception and is currently beating the market by 350 basis points. Try it today with no obligation to buy.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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