Toll Brothers
TOL
$134.92
+1.84%
Toll Brothers, Inc. is the leading luxury homebuilder in the United States, designing and constructing high-end residential communities across 24 states and over 60 markets, with additional urban for-sale and for-rent properties. The company differentiates itself through its premium brand, catering to move-up, active-adult, and second-home buyers, and consistently ranks among the top 10 U.S. builders by revenue. Currently, the stock is at the center of investor debate as it navigates a high-interest-rate environment that has pressured housing demand, while simultaneously benefiting from a structural housing shortage and strategic expansion moves, such as the acquisition of Buffington Homes in Northwest Arkansas. Recent analyst actions and news highlight a mix of optimism over its earnings resilience and buyback program, contrasted with concerns about affordability and margin compression.…
TOL
Toll Brothers
$134.92
Related headlines
Investment Opinion: Should I buy TOL Today?
Based on the analysis, I rate TOL as a Hold. The stock offers a compelling valuation (P/E 9.92x) and a strong balance sheet, but the fundamental picture is deteriorating with revenue declines and margin compression. The analyst consensus is 'Buy' with an average target of $171.87, implying 21.3% upside, but the wide target range and recent downgrades suggest caution. The thesis is that TOL is a quality company facing cyclical headwinds, and the stock is fairly valued given the risks.
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TOL 12-Month Price Forecast
The AI assessment is neutral, reflecting the balance between value and negative momentum. TOL's low valuation and strong balance sheet provide a margin of safety, but the declining revenue and margins are concerning. The stock's underperformance and high beta suggest continued volatility. The stance would upgrade to bullish if revenue growth turns positive and margins stabilize, or if the stock price drops to a more attractive level below $130. Conversely, a downgrade to bearish would occur if revenue decline accelerates or margins deteriorate further. The key is to monitor the housing market and interest rate trajectory.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Toll Brothers's 12-month outlook, with a consensus price target around $171.29 and implied upside of +26.9% versus the current price.
Average Target
$171.29
0 analysts
Implied Upside
+26.9%
vs. current price
Analyst Count
—
covering this stock
Price Range
$122 - $195
Analyst target range
Toll Brothers is covered by 15 analysts, with a consensus recommendation of 'Buy' and a mean recommendation score of 1.78 (where 1 is Strong Buy and 5 is Sell). The average price target is $171.87, implying a 21.3% upside from the current price of $141.73, indicating a bullish sentiment among analysts. The distribution of ratings is not explicitly provided, but the mean score and recent actions suggest a majority of Buy or Outperform ratings, with only one Underweight from Barclays as of July 2026. The target price range spans from a low of $122.00 to a high of $195.00, with the low target representing a 13.9% downside from current levels, likely reflecting a scenario of prolonged high interest rates and margin erosion, while the high target implies a 37.6% upside, assuming a robust housing recovery and successful expansion into new markets like Northwest Arkansas. Recent institutional actions show a positive tilt, with Citigroup upgrading from Neutral to Buy in July 2026 and Keefe, Bruyette & Woods upgrading from Market Perform to Outperform in June 2026, while Barclays maintained its Underweight, indicating a divergence in views on the stock's near-term prospects. The wide spread between the low and high targets (73 points) underscores the high uncertainty surrounding the housing market's trajectory and the company's ability to navigate it.
Bulls vs Bears: TOL Investment Factors
Toll Brothers presents a classic value-versus-momentum dilemma. The bull case is anchored by a compelling valuation (9.92x P/E vs. 12x industry), strong balance sheet, and analyst consensus of 21.3% upside. However, the bear case is equally compelling, with accelerating revenue declines (-7.59% YoY), margin compression, and significant underperformance relative to the market. Currently, the bearish evidence on fundamentals is stronger, as the company's core business is contracting and profitability is eroding. The single most important tension is whether the revenue decline is cyclical (recoverable with rate cuts) or structural (due to affordability shifts in luxury housing). If the former, the stock is deeply undervalued; if the latter, the low P/E may be a value trap. The outcome of this debate will determine the stock's trajectory over the next 12 months.
Bullish
- Compelling Valuation Discount: TOL trades at a trailing P/E of 9.92x, a 17% discount to the industry average of ~12x, and near the low end of its historical P/E range (1.90x–19.29x). This suggests the market is pricing in pessimistic expectations, offering a potential value entry for investors.
- Analyst Consensus and Upside: With a consensus 'Buy' rating and an average price target of $171.87, analysts see a 21.3% upside from the current price of $141.73. Recent upgrades from Citigroup and KBW in mid-2026 reinforce positive sentiment, despite one Underweight from Barclays.
- Strong Balance Sheet and Liquidity: TOL maintains a debt-to-equity ratio of 0.35 and a current ratio of 4.17, indicating ample liquidity and low financial risk. This financial stability allows the company to navigate housing downturns and continue capital returns.
- Proven Profitability and ROE: Despite revenue declines, TOL remains highly profitable with a net margin of 10.3% in Q2 2026 and a trailing twelve-month ROE of 16.3%. This demonstrates efficient capital use and resilience in a challenging demand environment.
Bearish
- Revenue Contraction Accelerating: Q2 2026 revenue fell 7.59% YoY to $2.53B, following sequential declines from $3.42B in Q4 2025 and $2.95B in Q3 2025. This trend indicates weakening demand for luxury homes, likely due to high mortgage rates and affordability constraints.
- Margin Compression Pressuring Earnings: Gross margin dropped to 23.9% in Q2 2026 from 26.0% in Q4 2025, and net margin fell to 10.3% from 13.0% over the same period. The company is using incentives to drive sales, which erodes profitability and may signal pricing power loss.
- Underperformance vs. Market: TOL's stock declined 2.53% over the past year, significantly lagging the S&P 500's 18.65% gain. Relative strength is negative across all timeframes (1M: -8.59%, 6M: -18.58%), indicating persistent selling pressure and weak investor conviction.
- High Beta and Interest Rate Sensitivity: With a beta of 1.332, TOL is highly sensitive to macroeconomic shifts, particularly interest rates. Persistent inflation fears and tight financial conditions, as noted in May 2026 news, could further dampen housing demand and compress valuations.
TOL Technical Analysis
Toll Brothers' stock is in a broad consolidation phase, having declined 2.53% over the past year, underperforming the S&P 500's 18.65% gain. The current price of $141.73 sits at 84.2% of its 52-week range (low $123.15, high $168.36), indicating it is closer to the lower end of its yearly band, which often suggests a potential value opportunity but also reflects persistent selling pressure. The stock's 52-week low of $123.15 was tested in May 2026, and while it has bounced, the inability to reclaim its highs signals a lack of strong upward conviction.
Beta
1.33
1.33x market volatility
Max Drawdown
-25.3%
Largest decline past year
52-Week Range
$123-$168
Price range past year
Annual Return
-8.2%
Cumulative gain past year
| Period | TOL Return | S&P 500 |
|---|---|---|
| 1m | -9.2% | -1.1% |
| 3m | -8.3% | +3.0% |
| 6m | -1.3% | +15.4% |
| 1y | -8.2% | +16.2% |
| ytd | -0.5% | +12.1% |
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TOL Fundamental Analysis
Toll Brothers' revenue trajectory has turned negative, with the most recent quarter (Q2 2026, ended April 30, 2026) reporting $2.53 billion, a 7.59% decline year-over-year, following a pattern of sequential deceleration from $3.42 billion in Q4 2025 and $2.95 billion in Q3 2025. The company's homebuilding segment generated $2.51 billion of that revenue, while land sales contributed $18.8 million, indicating the core business is contracting as higher mortgage rates dampen demand for luxury homes. Despite the revenue decline, the company remains highly profitable, with a net income of $260.6 million in Q2 2026, translating to a net margin of 10.3%, though this is down from 13.0% in Q4 2025 and 12.6% in Q3 2025, reflecting margin compression. Gross margin in Q2 2026 was 23.9%, down from 26.0% in Q4 2025, as the company has used incentives to drive sales, while operating margin fell to 13.7% from 16.5% in the prior quarter, indicating rising cost pressures. The company's balance sheet remains solid, with a debt-to-equity ratio of 0.35 and a current ratio of 4.17, providing ample liquidity, and it generated $1.22 billion in trailing twelve-month free cash flow, though quarterly cash flow was only $110 million in Q2 2026 due to working capital investments. Return on equity stands at 16.3%, reflecting strong shareholder value creation, and the company continues to return capital via buybacks ($179.6 million in Q2 2026) and dividends, with a payout ratio of 7.2%.
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 Toll Brothers' positive net income, the price-to-earnings (PE) ratio is the most appropriate valuation metric. The trailing PE is 9.92x, while the forward PE is 10.07x, indicating that the market expects earnings to remain relatively flat, with a slight decline in the coming year, which is consistent with the company's recent revenue contraction. The stock trades at a price-to-sales ratio of 1.22x, which is below the historical average, and its EV/EBITDA of 8.05x suggests a reasonable valuation relative to its earnings power. Compared to the broader residential construction industry, Toll Brothers' PE of 9.92x is at a discount to the sector average of approximately 12x (based on available industry data), representing a 17% discount, which may be justified by its higher-end product mix that is more sensitive to economic downturns. Historically, the stock's PE has ranged from as low as 1.90x in Q4 2022 to as high as 19.29x in Q1 2025, with the current 9.92x sitting near the lower end of that band, suggesting the market is pricing in pessimistic expectations, but also potentially offering a value opportunity if the company can stabilize its growth.
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 significant. TOL's revenue has declined for three consecutive quarters, with Q2 2026 down 7.59% YoY, indicating a clear contraction trend. This has led to margin compression, with gross margin falling from 26.0% in Q4 2025 to 23.9% in Q2 2026, and net margin dropping from 13.0% to 10.3%. The company is using incentives to maintain sales, which erodes profitability and may not be sustainable. While the balance sheet is solid (D/E 0.35, current ratio 4.17), the reliance on continued capital returns (buybacks and dividends) could strain cash flow if the downturn deepens. Free cash flow TTM is $1.22B, but quarterly FCF was only $110M in Q2 2026, suggesting working capital pressures that could limit future buybacks.