Is Toro (NYSE:TTC) experiencing one of those pauses that refreshes?

Though it's been a strong stock for a number of years, there's an outside chance that Toro could still wind up lower for the year, because investors have gotten a bit more nervous about the company's growth prospects.

After all, Toro's results for its fourth quarter weren't anything too special. As in the third quarter, there were good numbers in the professional business and not-so-good ones in the residential business. Sales were flat and almost certainly would have been down if acquisitions hadn't been included. Gross margin and operating margin both slipped a bit, and the company's operating earnings dropped 19%. Were it not for some healthy growth in "other" income, the drop in net income wouldn't have been pretty.

When I last reviewed Toro, a landscaping equipment company, I hit it fairly hard for its blathering about "record earnings" and borrowing money to finance stock repurchases. That still aggravates me. It's also important to note, though, that the company exited this fiscal year with a return on invested capital of more than 20% and a debt-equity ratio of less than one-half.

What's more, Toro still has new product and market extension opportunities in the commercial business. Competitors like Deere (NYSE:DE), Honda (NYSE:HMC), Electrolux (NASDAQ:ELUXY), and Textron (NYSE:TXT) will all have something to say about that in their respective market niches, but there is still a real opportunity here.

If it sounds like I'm wavering on Toro's fortunes, well, I am. I don't like some of the things I'm hearing from management, but it's tough to argue with a company that generates such a solid return on its assets and capital base. Valuation models don't make me feel any more secure either -- the stock looks a bit pricey on an earnings-powered model, but a bit undervalued on a cash flow-based approach.

When it's all said and done, this is exactly why I buy stocks using a margin of safety. For Toro to hit that mark, it would have to drop about 10% or so from here (a price still above October's lows). I'm nervous about some recent management decisions, and the current pace of income and free cash flow growth, but this could be one of those times when careful due diligence and an opportunistic entry price makes up for the drawbacks.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).