Toromont Industries

The business

Toromont operates two segments: the Equipment Group — a Caterpillar dealership across Ontario, Quebec, Manitoba, Atlantic Canada and Nunavut (plus rentals, agriculture and power systems) — and CIMCO, a designer/builder of industrial and recreational refrigeration systems.

Like Finning, the value engine is the aftermarket: selling machines grows an installed base that throws off recurring, higher-margin parts and service revenue over time.

The moat

A protected Caterpillar dealership franchise across a large, economically important Canadian territory.

A long track record of best-in-class inventory discipline, returns on capital and conservative financing sets Toromont apart from peers; CIMCO adds a niche refrigeration franchise (including natural-refrigerant/ammonia expertise).

A growing installed base and product-support network create switching costs and a recurring revenue annuity.

Financial snapshot

Most recent reported period : Q2 FY2026 (ended Jun 30, 2026). Figures reflect the review date — confirm current numbers before acting.

Free cash flow yield & sustainable growth

Free cash flow yield : ≈2.9%TTM free cash flow of ~C$506.8M divided by ~C$17.2B market cap ≈ 2.95%.

Free cash flow of ~C$507M (TTM) funds a rising dividend, buybacks and bolt-on acquisitions while keeping leverage very low.

Sustainable growth rests on installed-base and product-support expansion, disciplined territory/dealer acquisitions, and CIMCO's refrigeration backlog — but Q2 showed margins can lag when revenue mix shifts.

See the full free-cash-flow yield ranking →

Valuation & what to watch

At ~34x trailing earnings and a ~2.9% FCF yield, Toromont carries the richest multiple of the Canadian Cat dealers — a premium the market awards for its exceptional consistency and balance-sheet strength.

That valuation leaves limited margin of safety: strong Q2 revenue growth did not translate into EPS growth, and the multiple assumes durable double-digit compounding.

Dividend

Pays C$2.24 per share annually (yield ~1.01%), recently raised ~8%, with a multi-decade record of annual increases. A low payout ratio makes the growing dividend highly secure and leaves room for reinvestment.

Risks & the bear case

• Concentrated in Eastern-Canadian construction, mining and infrastructure cycles; a regional slowdown would pressure equipment sales.
• Single-supplier reliance on Caterpillar; supply-chain and equipment-availability constraints can shift results between quarters.
• The premium valuation is the key risk — as Q2 showed, flat earnings against a 34x multiple offers little downside cushion.

Recent developments

Q2 FY2026 revenue jumped ~16% but net income and EPS were essentially flat, signalling margin pressure or mix effects even amid strong demand.

The stock is up sharply over the past year (market cap ~+52%); the dividend was again increased (~8%), extending a long growth streak.

Verdict

Toromont is arguably the best-run equipment dealer in Canada — conservative, high-return and remarkably consistent, with a fortress balance sheet and a decades-long dividend-growth record. The catch is price: at ~34x earnings and a sub-3% FCF yield, quality is fully recognized, and Q2's flat earnings against strong revenue is a reminder that even great operators face margin and cyclical headwinds. A high-quality name where valuation, not business quality, is the debate. CoinCompass is a publisher, not an investment adviser.