Toll Brothers (TOL) Margin Decline Reinforces Bearish Narratives Despite Solid Q4 EPS

Toll Brothers (TOL) just closed out FY 2025 with fourth quarter revenue of about $3.4 billion and basic EPS of $4.62, setting the tone for a year where trailing 12 month revenue reached roughly $11.0 billion and EPS came in at $13.60. The company has seen quarterly revenue move from $2.9 billion in Q3 2025 to $3.4 billion in Q4, while basic EPS stepped up from $3.76 to $4.62 over the same stretch, giving investors plenty to weigh as they gauge how sustainable the current profitability profile and margins really are.

See our full analysis for Toll Brothers.

With the headline numbers on the table, the next step is to see how these results line up with the big narratives around Toll Brothers, from growth expectations to concerns about margin pressure.

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Margins Slip From 14.6% To 12.6%

• Net profit margin over the last year came in at 12.6%, down from 14.6% the prior year, even as trailing 12 month revenue edged up to about $11.0 billion.
• Critics highlight that rising incentives and spec building threaten profitability, and the margin data partially backs this bearish angle:
  • The step down from 14.6% to 12.6% aligns with concerns that more aggressive pricing and incentives are pressuring profitability.
  • At the same time, four straight quarters of revenue between roughly $1.9 billion and $3.4 billion show demand has not collapsed, which limits how extreme the bearish case looks today.

Revenue Up 2.2%, Earnings Barely Grow

• On a trailing 12 month basis, revenue has been growing about 2.2% per year, while earnings growth is only around 0.3% per year, much slower than the broader US market benchmarks of 10.7% and 16.2% respectively.
• Analysts' consensus narrative leans bullish on community expansion and affluent demand, and the growth numbers cut both ways here:
  • The modest 2.2% revenue growth contrasts with expectations that new communities and demographic tailwinds will drive stronger top line progress.
  • However, five year earnings growth of 21.5% per year gives the bullish camp historical evidence that the business can grow faster than the recent 0.3% earnings pace when conditions are more favorable.

Over the last year, Toll Brothers’ slower 2.2% revenue growth and 0.3% earnings growth test how durable those long term growth stories really are as new communities ramp up and luxury demand evolves. 🐂 Toll Brothers Bull Case

Low 9.5x P/E Versus Slower Outlook

• Toll Brothers trades at about 9.5 times trailing earnings, below both the peer average of 18.4 times and the US Consumer Durables industry at 11 times, while the current share price of $132.98 also sits well below a DCF fair value of roughly $196.80.
• Bears argue that below market growth and margin compression justify this discount, and the figures give their case some support:
  • Trailing revenue and earnings growth lag the US market at 2.2% and 0.3% per year, which can explain why the multiple sits under peer and industry levels.
  • The drop in net margin from 14.6% to 12.6% reinforces the idea that profitability is under pressure, even if valuation metrics point to potential upside versus DCF fair value.

Skeptics see the 9.5x P/E and margin slippage as signs the market is rightly cautious despite the apparent DCF upside. 🐻 Toll Brothers Bear Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Toll Brothers on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

See the numbers differently, or draw a different conclusion, then use that angle to build your own narrative in just a few minutes, Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Toll Brothers.

Explore Alternatives

Toll Brothers' slowing revenue and earnings growth, alongside slipping margins, raises questions about how durable its profitability will be if housing conditions soften further.

If you want steadier performance than this patchy record suggests, focus on stable growth stocks screener (2091 results) to quickly find businesses delivering more consistent growth and resilience through different market cycles.

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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