Does the Recent 6.7% Jump Suggest a New Opportunity in Toll Brothers in 2025?

• If you have ever found yourself wondering whether Toll Brothers is trading at a fair price right now, you are not alone. You are in for some fresh insights.
• Toll Brothers’ stock has climbed 6.7% in the last week and delivered a 4.4% gain over the past month, following a solid 202.0% return across three years. It is worth noting there has been a -14.2% pullback over the past year.
• Recent headlines have spotlighted the strong demand for new homes across the U.S. and Toll Brothers’ continued expansion into new markets, which has fueled investor optimism. At the same time, shifts in mortgage rates and supply chain updates have added intrigue and volatility to the share price.
• Our initial screen gives Toll Brothers a strong valuation score of 5 out of 6. Is this the whole story? Let’s dig into the main ways investors value a stock and why a deeper look could reveal the real opportunity here.

Find out why Toll Brothers's -14.2% return over the last year is lagging behind its peers.

Approach 1: Toll Brothers Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and then discounting them back to today's dollar value. This approach aims to capture the present worth of all the profit the company is expected to generate, using a defined set of assumptions and growth rates.

Toll Brothers currently generates Free Cash Flow (FCF) of $920 million. Analysts expect FCF to grow annually, with projections reaching approximately $1.68 billion five years from now and continued extrapolated increases over the next decade. Specifically, by 2035, Toll Brothers' FCF is estimated at about $1.28 billion, with these longer-range figures taken from Simply Wall St’s extrapolations based on available analyst data.

Based on this model, the estimated intrinsic fair value for Toll Brothers shares is $191.39. This implies the stock is trading at a 26.6% discount to its calculated worth. In other words, the shares are considered undervalued compared to what the business’s projected cash flows suggest.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Toll Brothers is undervalued by 26.6%. Track this in your watchlist or portfolio, or discover 933 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Toll Brothers.

Approach 2: Toll Brothers Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used to value profitable companies like Toll Brothers because it links a company’s share price to its earnings. For investors, a lower PE can signal a bargain if earnings are reliable, while a higher PE generally reflects expectations for superior growth or reduced risk.

A "normal" or "fair" PE ratio is not just about comparing one company to another. Instead, it factors in growth expectations, competitive strength, risk factors, and the stability of earnings. If investors anticipate stronger earnings growth or see lower risks in a business, they are typically willing to pay a higher multiple for each dollar of earnings.

Currently, Toll Brothers trades at a PE ratio of 9.85x. This is below the Consumer Durables industry average of 11.83x and the average for its peers, which stands at 18.85x. These benchmarks alone can make Toll Brothers appear attractively valued in its sector.

However, Simply Wall St’s proprietary "Fair Ratio" takes the analysis further by considering not just those benchmarks, but also unique variables like the company’s growth outlook, profit margins, size, and risk profile. For Toll Brothers, the Fair Ratio is calculated at 14.87x. This means the stock’s current valuation is notably below what would be expected given its fundamentals and industry context.

By using the Fair Ratio rather than only industry averages or peers, investors get a more tailored and comprehensive sense of whether the current price represents good value.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Toll Brothers Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple but powerful idea. It allows you to create and share your own story about a company, connecting your outlook and research (such as future revenue, earnings, and margins) to a forecast and fair value you believe in. Narratives link the company’s story to a tailored financial forecast, helping you move beyond generic numbers and benchmarks.

This approach is accessible and easy to use via Simply Wall St’s Community page, where millions of investors publish their Narratives for any stock. With Narratives, you can quickly see whether your fair value is above or below today’s share price and decide if it is time to buy, hold, or sell based on your personal thesis. Narratives update automatically when new news, results, or events happen, so your investment decisions can keep pace with real-world developments.

For example, some investors see Toll Brothers’ expansion into luxury communities and strong millennial demand as a growth engine, setting their fair value as high as $183. Others focus on rising regulatory costs or housing market risks and estimate a fair value as low as $92, all depending on their own perspective and assumptions.

Do you think there's more to the story for Toll Brothers? Head over to our Community to see what others are saying!

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.

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