Toll Brothers, Inc. (NYSE:TOL), which is in the consumer durables business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Toll Brothers’s outlook and valuation to see if the opportunity still exists.
What’s the opportunity in Toll Brothers?Good news, investors! Toll Brothers is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $61.39, but it is currently trading at US$31.89 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Toll Brothers’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Toll Brothers generate?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 negative profit growth of -4.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Toll Brothers. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although TOL is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to TOL, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on TOL for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Toll Brothers. You can find everything you need to know about Toll Brothers in the latest infographic research report. If you are no longer interested in Toll Brothers, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.