Toll Brothers
TOL
$147.09
+1.36%
Toll Brothers, Inc. is the leading luxury homebuilder in the United States, specializing in high-end residential communities for move-up, active-adult, and second-home buyers across over 60 markets in 24 states. As a top 10 U.S. homebuilder by closings, the company differentiates itself with an average sale price well above public competitors, and also develops luxury for-sale and for-rent properties in urban centers. The current investor narrative centers on the company's strong earnings, aggressive share buybacks, and attractive valuation, positioning it as a potential beneficiary of a market rotation away from crowded AI trades, while also navigating a housing market characterized by structural shortages and persistent inflation concerns. Recent strategic moves, such as the acquisition of Buffington Homes in Northwest Arkansas, highlight its expansion into high-growth luxury markets.…
TOL
Toll Brothers
$147.09
Related headlines
Investment Opinion: Should I buy TOL Today?
Based on the analysis, TOL is rated a Buy. The stock offers a compelling value proposition with a trailing PE of 9.92x, a forward PE of 10.50x, and a price-to-sales ratio of 1.22x, all below historical averages and the broader market. The average analyst target of $168.20 implies a 13.4% upside, and the company's strong balance sheet (debt-to-equity of 0.35) supports continued buybacks and dividends. The recent acquisition of Buffington Homes and positive analyst sentiment from firms like RBC Capital reinforce the bullish thesis.
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TOL 12-Month Price Forecast
The AI assessment leans bullish due to the compelling valuation and strong balance sheet, but confidence is medium given the negative revenue trend. The stock's low PE and high ROE (16.3%) suggest it is undervalued, but the declining revenue and high beta introduce significant risk. If housing demand stabilizes and revenue growth turns positive, the stock could re-rate higher. Conversely, if the downturn persists, the stock could test its 52-week low. The AI stance would be upgraded to high confidence if Q3 2026 revenue shows positive growth, and downgraded to bearish if revenue declines accelerate.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Toll Brothers's 12-month outlook, with a consensus price target around $170.80 and implied upside of +16.1% versus the current price.
Average Target
$170.80
0 analysts
Implied Upside
+16.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$122 - $195
Analyst target range
The target price range spans from a low of $122.00 to a high of $187.00, with the high target suggesting a potential upside of 26.1% from the current price, likely assuming a housing market rebound and successful execution of growth strategies. The low target implies a downside of 17.7%, reflecting risks such as margin compression or a prolonged downturn in housing demand. The wide spread of $65 between the low and high targets signals significant uncertainty about the company's future performance, which is typical for cyclical homebuilders. Recent institutional actions show a mix of upgrades and one downgrade, with firms like RBC Capital and Evercore ISI reiterating Outperform ratings, indicating a generally constructive outlook among analysts.
Bulls vs Bears: TOL Investment Factors
Toll Brothers presents a classic value-versus-cyclicality debate. On the bull side, the stock trades at a deeply discounted 9.9x trailing PE, has a strong balance sheet with a 0.35 debt-to-equity ratio, and enjoys positive analyst sentiment with an average target of $168.20, implying 13.4% upside. On the bear side, revenue is declining 7.6% YoY, the stock has underperformed the S&P 500 by 7.2% over the past year, and its high beta of 1.34 amplifies market risk. The most critical tension is whether the current revenue decline is a temporary cyclical dip or the start of a prolonged downturn. If housing demand stabilizes and rates ease, TOL's low valuation could lead to significant upside; if not, the stock could test its 52-week low of $123.15. Currently, the evidence slightly favors the bull case given the valuation cushion and strategic moves, but the bear case is compelling due to the negative growth trajectory. Investors should watch quarterly revenue trends and mortgage rate movements closely.
Bullish
- Deep Value with 9.9x Trailing PE: TOL trades at a trailing PE of 9.92x and forward PE of 10.50x, well below the S&P 500's ~20x average. This low multiple, combined with a 12.3% net margin, suggests the market is pricing in significant cyclical risk, offering a margin of safety for value-oriented investors.
- Analyst Targets Imply 13.4% Upside: The average analyst target price is $168.20, representing a 13.4% upside from the current price of $148.27. The high target of $187.00 suggests a potential 26.1% gain, reflecting optimism about a housing market recovery and TOL's strategic expansion.
- Strong Balance Sheet with Low Debt: TOL's debt-to-equity ratio is only 0.35, and the current ratio is 4.17, indicating ample liquidity to weather downturns. This financial strength supports continued share buybacks and dividend payments, enhancing shareholder returns.
- Strategic Expansion into High-Growth Markets: The acquisition of Buffington Homes in Northwest Arkansas expands TOL's footprint into a high-growth luxury market, aligning with its strategy to capture demand in underserved areas. This move could drive future revenue growth beyond its traditional markets.
Bearish
- Revenue Declining 7.6% YoY: Q2 2026 revenue fell 7.59% YoY to $2.53 billion, following a 16.6% increase in Q1. This deceleration indicates weakening demand, likely due to elevated mortgage rates, which could persist and pressure future earnings.
- Underperforming S&P 500 by 7.2%: TOL's 1-year return of +13.17% lags the S&P 500's +20.37%, and its 6-month return is -10.75% vs. +13.87% for the index. This relative weakness suggests investors are rotating away from homebuilders, potentially due to cyclical concerns.
- High Beta of 1.34 Amplifies Market Risk: With a beta of 1.34, TOL is 34% more volatile than the market, meaning it could fall more sharply during a downturn. This makes it a riskier holding for investors with lower risk tolerance, especially in a rising rate environment.
- Negative PEG Ratio Signals Earnings Decline: The PEG ratio of -0.96 indicates that earnings are expected to decline, as the negative value reflects a negative growth rate. This is consistent with the recent revenue drop and suggests that the low PE may not be as attractive if earnings continue to fall.
TOL Technical Analysis
Toll Brothers' stock has exhibited a volatile yet upward long-term trend, with a 1-year price change of +13.17%, though it has underperformed the S&P 500's +20.37% over the same period. The current price of $148.27 sits at approximately 88% of its 52-week range (low $123.15, high $168.36), indicating the stock is closer to its highs but has pulled back from the peak, suggesting a consolidation phase after a strong run. The 6-month change of -10.75% reveals a significant correction from the highs, yet the stock remains well above its 52-week low, reflecting underlying support.
Beta
1.34
1.34x market volatility
Max Drawdown
-25.3%
Largest decline past year
52-Week Range
$123-$168
Price range past year
Annual Return
+11.8%
Cumulative gain past year
| Period | TOL Return | S&P 500 |
|---|---|---|
| 1m | -1.3% | +2.5% |
| 3m | +9.5% | +2.7% |
| 6m | -9.2% | +11.1% |
| 1y | +11.8% | +20.5% |
| ytd | +8.5% | +12.3% |
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TOL Fundamental Analysis
Toll Brothers' revenue trajectory has been uneven, with the most recent quarter (Q2 2026, ending April 30, 2026) reporting revenue of $2.53 billion, a decline of 7.59% year-over-year, following a 16.6% increase in Q1 2026 (revenue of $2.15 billion vs. $1.86 billion in Q1 2025). The multi-quarter trend shows deceleration, with Q4 2025 revenue of $3.42 billion up 2.7% YoY, but Q3 2025 revenue of $2.95 billion up 8.0% YoY, indicating a slowdown in growth. The homebuilding segment, which generated $2.51 billion in Q2 2026, is the primary driver, while land sales contributed a minor $18.8 million, so the core business is facing demand headwinds amid higher mortgage rates.
Quarterly Revenue
$2.5B
2026-04
Revenue YoY Growth
-7.6%
YoY Comparison
Gross Margin
23.9%
Latest Quarter
Free Cash Flow
$1.2B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TOL Overvalued?
Given that Toll Brothers is profitable (net income of $260.6 million in Q2 2026), the primary valuation metric is the price-to-earnings (PE) ratio. The trailing PE is 9.92x, while the forward PE is 10.50x, indicating that the market expects earnings to remain relatively stable, with a slight increase in the denominator. The gap between trailing and forward PE is minimal, suggesting that analysts project flat earnings growth, which is consistent with the recent revenue decline. This low single-digit PE multiple is typical for homebuilders, which are cyclical and often trade at a discount to the broader market.
PE
9.9x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 2x~16x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
8.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are prominent. TOL's revenue declined 7.59% YoY in Q2 2026, and its net margin contracted to 10.3% from 12.9% a year earlier, indicating margin pressure. The company's free cash flow of $1.22 billion is positive, but the negative PEG ratio suggests earnings are expected to decline, which could reduce future cash flows. With a debt-to-equity ratio of 0.35, leverage is manageable, but a prolonged downturn could strain liquidity despite a current ratio of 4.17. The reliance on the homebuilding segment (99% of revenue) makes TOL highly sensitive to housing market cycles, and any sustained drop in demand would directly impact profitability.
FAQ
The key risks are: (1) Financial risk: Revenue declined 7.6% YoY in Q2 2026, and if this continues, earnings could fall, pressuring the stock. (2) Market risk: With a beta of 1.34, TOL is more volatile than the market, so a broad market downturn could hit it harder. (3) Competitive risk: Other homebuilders like Lennar and D.R. Horton compete for buyers, and a price war could compress margins. (4) Macro risk: Rising mortgage rates above 7% would further dampen housing demand, as seen in the recent revenue decline. The most severe risk is a prolonged housing recession, which could drive the stock down to its 52-week low of $123.15, a 17% downside.
The 12-month forecast for TOL is mixed, with three scenarios: Bull case (30% probability) targets $168-$187, assuming a housing recovery and revenue growth; Base case (50% probability) targets $148-$168, with stable revenue and margins; Bear case (20% probability) targets $122-$135, if the downturn deepens. The most likely scenario is the base case, which aligns with the analyst average target of $168.20, implying a 13.4% upside. The key assumption is that revenue decline will stabilize and turn positive by 2027. If mortgage rates fall, the bull case could materialize; if they rise, the bear case is more likely.
TOL appears undervalued based on its trailing PE of 9.92x and forward PE of 10.50x, which are significantly lower than the S&P 500's average of around 20x. Its price-to-sales ratio of 1.22x and EV/EBITDA of 8.05x also suggest a discount to the broader market. However, the negative PEG ratio of -0.96 indicates that earnings are expected to decline, which could justify the low multiple. Compared to its own history, TOL's current PE is below its 5-year average of ~12x, suggesting it is trading at a discount. The market is pricing in a cyclical downturn, but if the company can stabilize earnings, the stock could re-rate higher.
TOL is a good buy for value investors with a long-term horizon and a tolerance for cyclical risk. The stock trades at a trailing PE of 9.92x, well below the market average, and analysts see a 13.4% upside to the average target of $168.20. The company has a strong balance sheet with a debt-to-equity ratio of 0.35 and generates positive free cash flow of $1.22 billion. However, the recent revenue decline of 7.6% YoY and high beta of 1.34 mean it is not suitable for risk-averse investors. If you believe the housing market will recover, TOL offers an attractive risk/reward; otherwise, wait for signs of stabilization.
TOL is better suited for long-term investment, given its cyclical nature and high beta of 1.34. Short-term trading is risky due to the stock's volatility and sensitivity to economic data, such as mortgage rates and housing starts. For long-term investors, the low valuation (9.9x PE) and strong balance sheet provide a margin of safety, and the company's strategic expansion into new markets could drive growth over the next 3-5 years. The stock has a low dividend yield of 0.73%, so it is not ideal for income seekers. A minimum holding period of 3 years is recommended to ride out the housing cycle and capture the potential re-rating.