A strong performer from today's morning trading session is Toll Brothers, whose shares rose 1.2% to $75.98 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Toll Brothers Has Attractive Multiples and Trades Below Its Graham Number:
Toll Brothers, Inc., together with its subsidiaries, designs, builds, markets, sells, and arranges finance for a range of detached and attached homes in luxury residential communities in the United States. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Toll Brothers has a trailing 12 month P/E ratio of 6.1 and a P/B ratio of 1.3.
Toll Brothers's PEG ratio is 5.52, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
An Exceptionally Strong Balance Sheet:
| 2019-10-31 | 2020-10-31 | 2021-10-31 | 2022-10-31 | |
|---|---|---|---|---|
| Revenue (MM) | $7,224 | $7,078 | $8,790 | $10,276 |
| Gross Margins | 19.6% | 20.0% | 22.1% | 24.2% |
| Operating Margins | 9.4% | 7.8% | 11.6% | 14.7% |
| Net Margins | 8.17% | 6.31% | 9.48% | 12.52% |
| Net Income (MM) | $590 | $447 | $834 | $1,286 |
| Net Interest Expense (MM) | $19 | $8 | $4 | $0 |
| Depreciation & Amort. (MM) | -$72 | -$69 | -$76 | -$77 |
| Earnings Per Share | $4.03 | $3.4 | $6.63 | $12.38 |
| EPS Growth | n/a | -15.63% | 95.0% | 86.73% |
| Diluted Shares (MM) | 147 | 131 | 126 | 109 |
| Free Cash Flow (MM) | $351 | $899 | $1,236 | $915 |
| Capital Expenditures (MM) | -$87 | -$110 | -$67 | -$72 |
| Net Current Assets (MM) | $4,479 | $4,181 | $4,431 | $4,882 |
| Current Ratio | 5.7 | 4.73 | 4.03 | 3.8 |
| Long Term Debt (MM) | $3,921 | $3,958 | $3,563 | $3,329 |
| Net Debt / EBITDA | n/a | 4.09 | 1.73 | n/a |
Toll Brothers benefits from exceptional EPS growth, an excellent current ratio, and low leverage. The company's financial statements show growing revenues and decreasing reinvestment in the business and consistent free cash flow. However, the firm has slimmer gross margins than its peers. Finally, we note that Toll Brothers has weak operating margings with a positive growth rate.
