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Toll Brothers (TOL)
NYSE:TOL
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Toll Brothers
(NYSE:TOL)
75Outperform
Positive Factors
Earnings
Toll Brothers expects a mix to boost second-quarter gross margins, with more luxury deliveries and closings in the higher-margin Pacific region.
Positioning
Toll Brothers Inc. is still best positioned versus peers, which supports the analyst's overweight rating.
Valuation
Valuation remains attractive relative to other builders with similar ROE profiles.
Negative Factors
Financial Performance
Lower EPS estimates reflect impairments in the first quarter and softer spring season demand.
Orders
Orders were light, increasing 13% vs. a forecast of 27%.
Outlook
The F2Q outlook was below expectations, with weaker order, deliveries and higher SG&A.
Toll Brothers (TOL) vs. S&P 500 (SPY)
Market Cap
$10.37B
Dividend Yield0.93%
Average Volume (3M)1.93M
Price to Earnings (P/E)7.2
Beta (1Y)1.27
Revenue Growth5.86%
EPS Growth12.20%
CountryUS
Employees4,900
SectorConsumer Cyclical
Sector Strength62
IndustryResidential Construction
Share Statistics
EPS (TTM)14.53
Shares Outstanding99,437,000
10 Day Avg. Volume1,444,048
30 Day Avg. Volume1,926,529
Financial Highlights & Ratios
PEG Ratio0.59
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.55
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit5.32
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$139.08Price Target Upside33.31% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering13
Toll Brothers Business Overview & Revenue Model
Company DescriptionToll Brothers, Inc. is a leading American luxury home builder, primarily operating in the residential construction sector. Founded in 1967 and headquartered in Fort Washington, Pennsylvania, the company is renowned for designing, building, marketing, and selling single-family detached and attached homes primarily in luxury residential communities. Toll Brothers caters to a diverse clientele, including move-up, empty-nester, active-adult, and second-home buyers, offering homes that are often customizable with a variety of architectural styles and features. In addition to homebuilding, the company engages in urban high-density and suburban low-density development projects.
How the Company Makes MoneyToll Brothers generates revenue primarily through the sale of homes and condominiums, focusing on luxury residential properties. The company earns money by acquiring land, developing residential communities, and selling completed homes to customers. Key revenue streams include the sale of single-family homes, condominiums, and luxury rental properties. Additionally, Toll Brothers benefits from strategic partnerships and joint ventures that expand its reach in the urban and high-rise markets. The company also offers ancillary services such as mortgage financing through its subsidiary, Toll Brothers Mortgage Company, which provides homebuyers with mortgage financing options, contributing to its revenue base. Land sales and other related activities, such as the development of master-planned communities, further supplement the company's income.
Toll Brothers Financial Statement Overview
Summary
Toll Brothers has demonstrated strong financial performance with consistent revenue growth and improving profitability. The balance sheet is robust with no debt, enhancing financial stability, and strong returns on equity. However, recent data shows a slight decline in revenue and cash flow, which requires attention.Income Statement
Toll Brothers has shown a strong financial performance in recent years, with consistent revenue growth and improving profitability. The gross profit margin and net profit margin have been healthy, reflecting efficient cost management. The company has maintained a solid EBIT and EBITDA margin, indicating strong operational performance. However, the recent TTM data shows a slight decline in revenue compared to the previous year, which is a point of concern.85
Very Positive
Balance Sheet
The balance sheet is robust with no debt in the latest TTM period, which significantly enhances financial stability. The debt-to-equity ratio has improved over the years due to zero debt in the latest period. The return on equity is strong, and the equity ratio remains solid, indicating a stable financial structure. The company has managed to increase its stockholders' equity, showcasing effective reinvestment strategies.90
Very Positive
Cash Flow
The cash flow statement reflects a strong operational cash flow, which exceeds net income, indicating good cash generation ability. The free cash flow has shown positive growth over the years, although there was a slight decline in the latest TTM period. The free cash flow to net income ratio is healthy, but the growth rate in free cash flow needs attention as it has decreased recently.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 10.85B | 9.99B | 10.28B | 8.79B | 7.08B | Gross Profit |
| 3.02B | 2.63B | 2.49B | 1.94B | 1.42B | EBIT |
| 2.04B | 1.72B | 1.51B | 1.02B | 550.26M | EBITDA |
| 2.12B | 1.80B | 1.59B | 1.10B | 676.51M | Net Income Common Stockholders |
| 1.57B | 1.37B | 1.29B | 833.63M | 446.62M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.30B | 1.30B | 1.35B | 1.64B | 1.37B | Total Assets |
| 13.37B | 12.53B | 12.29B | 11.54B | 11.07B | Total Debt |
| 2.96B | 2.98B | 3.33B | 3.56B | 3.96B | Net Debt |
| 1.66B | 1.68B | 1.98B | 1.92B | 2.59B | Total Liabilities |
| 5.68B | 5.71B | 6.27B | 6.20B | 6.14B | Stockholders Equity |
| 7.67B | 6.80B | 6.01B | 5.30B | 4.88B |
| Cash Flow | Free Cash Flow | |||
| 936.52M | 1.19B | 915.09M | 1.24B | 898.55M | Operating Cash Flow |
| 1.01B | 1.27B | 986.82M | 1.30B | 1.01B | Investing Cash Flow |
| -167.62M | -150.60M | -153.18M | -4.24M | -177.84M | Financing Cash Flow |
| -816.46M | -1.17B | -1.12B | -1.01B | -753.31M |
Toll Brothers Technical Analysis
Neutral
104.33
Price Trends
103.35
Positive
116.95
Negative
131.21
Negative
Market Momentum
-0.54
Negative
57.47
Neutral
90.96
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TOL, the sentiment is Neutral. The current price of 104.33 is above the 20-day moving average (MA) of 96.87, above the 50-day MA of 103.35, and below the 200-day MA of 131.21, indicating a neutral trend. The MACD of -0.54 indicates Negative momentum. The RSI at 57.47 is Neutral, neither overbought nor oversold. The STOCH value of 90.96 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TOL.
Toll Brothers Risk Analysis
Toll Brothers disclosed 29 risk factors in its most recent earnings report. Toll Brothers reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Toll Brothers Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $37.75B | 8.46 | 17.83% | 1.11% | -4.71% | -10.19% | |
78 Outperform | $20.94B | 7.37 | 25.52% | 0.82% | 8.86% | 13.60% | |
77 Outperform | $5.77B | 6.68 | 15.97% | ― | 12.19% | 23.15% | |
75 Outperform | $10.37B | 7.18 | 20.38% | 0.93% | 5.86% | 12.20% | |
74 Outperform | $20.89B | 14.48 | 38.25% | ― | 9.55% | 1.79% | |
67 Neutral | $28.89B | 8.02 | 14.97% | 1.85% | 2.03% | -3.80% | |
61 Neutral | $6.66B | 11.71 | 2.96% | 4.01% | 2.64% | -20.91% |
* Consumer Cyclical Sector Average
Performance Comparison
TOL
Toll Brothers
104.33
-22.40
-17.68%
DHI
DR Horton
127.31
-22.89
-15.24%
LEN
Lennar
110.20
-42.30
-27.74%
NVR
NVR
7,124.00
-500.83
-6.57%
PHM
PulteGroup
104.46
-12.35
-10.57%
TMHC
Taylor Morrison
58.90
0.28
0.48%
Toll Brothers Earnings Call Summary
Earnings Call Date:Feb 18, 2025
(Q1-2025)
| % Change Since: -14.29%|
Next Earnings Date:May 27, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed outlook with several positive aspects such as an increase in net contracts, low cancellation rates, and strong adjusted gross margin. However, these were offset by challenges such as net income below expectations, higher SG&A expenses, and market-specific challenges. The company's strategic approach to managing spec homes and land acquisitions reflects a cautious yet optimistic outlook. This balance of positive and negative factors indicates a neutral sentiment overall.Q1-2025 Updates
Positive Updates
Increase in Net Contracts
The company signed 2,307 net contracts for $2.3 billion in the first quarter, up 13% in units and 12% in dollars compared to last year.
Low Contract Cancellation Rate
The contract cancellation rate remained low at 2.4% of the beginning backlog, indicating strong buyer commitment.
Strong Adjusted Gross Margin
The first quarter adjusted gross margin was 26.9%, which was 65 basis points better than guidance.
Healthy Deposit Conversion Ratio
The deposit conversion ratio was 82%, significantly higher than the five-year average of 70%.
Solid Land Position
The company owned or controlled approximately 56,000 lots, with 56% optioned, providing flexibility and selectivity in land acquisition.
Extended Credit Facility
The company extended the maturities of its credit facilities to February 2030 and upsized its revolver to $2.35 billion.
Negative Updates
Net Income Below Expectations
Net income and earnings per share came in below expectations due to impairments and a delay in the sale of a stabilized apartment property.
Higher SG&A Expenses
SG&A expense as a percentage of home sales revenue was 13.1%, or 40 basis points above guidance, due to higher than anticipated selling and marketing expenses.
Challenges in Specific Markets
Mixed demand results were observed, with pressure on sales in certain markets due to affordability constraints and growing inventories.
Impairments and Write-offs
Write-offs in the home sale gross margin totaled $16.4 million, with impairments related to pre-development costs and operating communities.
Company Guidance
During the Toll Brothers First Quarter Fiscal Year 2025 Conference Call, several key metrics were highlighted. The company reported deliveries of 1,991 homes at an average price of $925,000, generating home sales revenue of $1.84 billion. The adjusted gross margin was 26.9%, which was 65 basis points better than expected. However, the SG&A expense ratio was 13.1%, surpassing guidance by 40 basis points. The company signed 2,307 net contracts valued at $2.3 billion, marking a 13% increase in units and a 12% rise in dollar value compared to the previous year. The contract cancellation rate was low at 2.4%. Toll Brothers maintained its full-year guidance, expecting deliveries between 11,200 and 11,600 homes, with an average price ranging from $945,000 to $965,000, and an adjusted gross margin of 27.25%. Additionally, the company projected SG&A expenses to account for 9.4% to 9.5% of home sales revenue for the full year. The company's balance sheet remains healthy, with $2.3 billion in liquidity and a net debt to capital ratio of 21.1%. They also plan to repurchase $500 million in shares throughout the year.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.