Should You Investigate Toll Brothers, Inc. (NYSE:TOL) At US$127?

Today we're going to take a look at the well-established Toll Brothers, Inc. (NYSE:TOL). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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, what if the stock is still a bargain? Today we will analyse the most recent data on Toll Brothers’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Toll Brothers

What Is Toll Brothers Worth?

Great news for investors – Toll Brothers is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Toll Brothers’s ratio of 8.22x is below its peer average of 11.53x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. 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 does the future of Toll Brothers look like?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -1.4% 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 trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider 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, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 2 warning signs for Toll Brothers (of which 1 is concerning!) you should know about.

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.