Yahoo Finance Why Toll Brothers, Inc. (NYSE:TOL) Could Be Worth Watching
Let's talk about the popular Toll Brothers, Inc. (NYSE:TOL). The company's shares saw a significant share price rise of 29% in the past couple of months on the NYSE. The recent jump in the share price has meant that the company is trading at close to its 52-week high. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Toll Brothers’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Toll Brothers
What's The Opportunity In Toll Brothers?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.32x is currently trading slightly below its industry peers’ ratio of 11.33x, which means if you buy Toll Brothers today, you’d be paying a decent price for it. And if you believe that Toll Brothers should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Toll Brothers’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Toll Brothers?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 3.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Toll Brothers, at least in the short term.
What This Means For You
Are you a shareholder? TOL’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at TOL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on TOL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Toll Brothers, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Toll Brothers you should be aware of.
If you are no longer interested in Toll Brothers, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
