Toll Brothers
TOL
$136.61
+0.18%
Toll Brothers, Inc. is the leading luxury homebuilder in the United States, operating across more than 60 markets in 24 states and catering primarily to move-up, active-adult, and second-home buyers, with traditional homebuilding representing the overwhelming majority of revenue. The company is distinct in the residential construction industry for its premium average selling price, which sits well above that of public competitors, and it consistently ranks among the top-10 U.S. builders by total closings while also developing luxury for-sale and for-rent urban properties. The current investor narrative centers on whether Toll Brothers can sustain earnings momentum amid a choppy housing backdrop, with recent headlines highlighting aggressive share buybacks, a bargain valuation relative to the market, and strategic geographic expansion through the acquisition of Buffington Homes in Northwest Arkansas. At the same time, the stock has become a focal point of debate over a potential rotation away from crowded AI trades into asset-backed, defensive sectors, even as persistent inflation fears and elevated mortgage-rate sensitivity weigh on sentiment toward homebuilders broadly.…
TOL
Toll Brothers
$136.61
Related headlines
Investment Opinion: Should I buy TOL Today?
Based on the synthesis of data, Toll Brothers earns a Hold rating with a value tilt. The core thesis is that the stock is deeply undervalued on sales (1.22x PS) and earnings (9.92x PE) with a fortress balance sheet, but near-term revenue and margin deterioration justify caution until a turnaround is evident. The analyst consensus is Buy with a mean of 1.82 and an average target of $171.40, implying 24.8% upside, but the mixed ratings and wide target range suggest the market is pricing in significant uncertainty.
Supporting evidence includes: 1) Revenue declined 7.59% year-over-year in Q2 2026, but the company remains profitable with a 12.28% net margin and 16.28% ROE; 2) Free cash flow is robust at $1.215 billion TTM, funding $179.6 million in buybacks and $24.4 million in dividends; 3) The balance sheet is conservative with a 0.35 debt-to-equity and 4.17 current ratio; 4) The stock trades at 1.22x sales, near the low end of its historical range, and at 9.92x earnings, mid-range historically. The implied upside to the average analyst target is 24.8%, and the high target of $195.00 suggests 42% upside if a housing rebound materializes.
The biggest risks are: 1) Continued margin compression—gross margin fell 185 basis points year-over-year to 23.9%; 2) A breakdown below the 52-week low of $123.15 could trigger further selling; 3) High beta of 1.332 amplifies market downturns. The rating would upgrade to Buy if gross margins stabilize above 24% and revenue growth turns positive, or downgrade to Sell if revenue declines accelerate beyond 10% or gross margins fall below 22%. Relative to its history and peers, TOL appears undervalued on sales but fairly valued on earnings given the negative growth trajectory.
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TOL 12-Month Price Forecast
Toll Brothers presents a classic value-versus-momentum dilemma. The stock is cheap on sales and earnings, with a fortress balance sheet and substantial analyst upside, but near-term fundamentals are deteriorating. The neutral stance reflects the balance between deep value and negative momentum. I would upgrade to bullish if gross margins stabilize above 24% and revenue growth turns positive, or downgrade to bearish if revenue declines accelerate or the stock breaks below $123.15. The high beta and cyclical nature warrant a cautious position size, but the long-term risk/reward is favorable for patient investors.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Toll Brothers's 12-month outlook, with a consensus price target around $171.40 and implied upside of +25.5% versus the current price.
Average Target
$171.40
0 analysts
Implied Upside
+25.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$122 - $195
Analyst target range
Toll Brothers is covered by 15 analysts, and the consensus recommendation is a Buy with a recommendation mean of 1.82 (where 1.0 is a Strong Buy and 5.0 is a Sell). The average target price is $171.40, which implies approximately 24.8% upside from the current price of $137.34, a bullish signal that stands in sharp contrast to the stock's recent price weakness. The consensus is clearly constructive, with the average target well above the 52-week high of $168.36, suggesting analysts believe the recent selloff is overdone and that the stock can reclaim and exceed prior highs. However, the Buy rating is not unanimous, as Barclays maintains an Underweight rating, indicating some skepticism about the housing cycle. The target range spans from a low of $122.00 to a high of $195.00, a wide $73 spread that signals significant disagreement about the company's trajectory. The high target of $195.00 implies roughly 42% upside and would require multiple expansion or a sharp earnings recovery, potentially driven by a housing rebound, successful integration of the Buffington Homes acquisition, or continued aggressive buybacks boosting EPS. The low target of $122.00, slightly below the 52-week low of $123.15, prices in a bearish scenario of continued margin compression, revenue declines, and a weakening luxury housing market. Recent institutional actions skew positive, with Citigroup upgrading to Buy from Neutral on 2026-07-10 and Keefe, Bruyette & Woods upgrading to Outperform from Market Perform on 2026-06-09, though Barclays reaffirmed its Underweight stance on 2026-07-14. The wide target spread and mixed ratings suggest elevated uncertainty, but the preponderance of Buy/Outperform ratings and the substantial implied upside indicate that analyst sentiment remains a supportive counterweight to the stock's recent technical weakness.
Bulls vs Bears: TOL Investment Factors
The bear case currently has stronger near-term evidence, given the 7.59% revenue decline, 185 basis point gross margin compression, and 16.33% three-month stock price drop. However, the bull case is supported by deep value metrics (9.92x PE, 1.22x PS), a fortress balance sheet (0.35 debt-to-equity), and a 24.8% analyst target upside. The single most important tension is whether the housing market stabilizes before margin compression erodes earnings further—if gross margins hold above 23% and revenue growth returns, the stock could re-rate toward analyst targets; if not, it risks testing the 52-week low of $123.15.
Bullish
- Deep Value on Earnings and Sales: TOL trades at a trailing PE of 9.92x and forward PE of 9.93x, with a price-to-sales ratio of just 1.22x—near the low end of its historical range (1.31x–7.37x). This suggests the market is pricing in a pessimistic revenue scenario despite the company's luxury franchise and 16.28% ROE.
- Analyst Consensus Sees 24.8% Upside: The 15-analyst consensus is Buy (mean 1.82) with an average target price of $171.40, implying 24.8% upside from the current $137.34. The high target of $195.00 suggests 42% upside if a housing rebound or successful buybacks drive multiple expansion.
- Fortress Balance Sheet and Cash Generation: Debt-to-equity is a conservative 0.35, the current ratio is a robust 4.17, and TTM free cash flow is $1.215 billion. With $1.172 billion in cash, Toll Brothers is self-funding and returned $179.6 million via buybacks and $24.4 million in dividends in the latest quarter alone.
- Aggressive Buybacks Shrinking Share Count: The company repurchased $179.6 million of stock in Q2 2026, reducing shares outstanding from 100.6 million a year ago to 95.1 million. This 5.5% reduction boosts EPS and signals management's confidence in the undervaluation.
Bearish
- Revenue and Margins Contracting Sharply: Q2 2026 revenue fell 7.59% year-over-year to $2.531 billion, while gross margin compressed 185 basis points to 23.9% from 25.75% a year earlier. Net income dropped to $260.6 million from $352.4 million, highlighting deteriorating profitability.
- Severe Underperformance and Negative Momentum: TOL has gained just 1.73% over the past year versus the S&P 500's 17.22% gain—a 15.5 percentage point underperformance. The stock is down 7.32% in the past month and 16.33% over three months, with relative strength versus SPY at -8.01% and -22.14%, respectively.
- Elevated Valuation Risk from Cyclicality: While the PE of 9.92x is mid-range historically (4.26x–19.29x), the negative PEG ratio of -0.96 and flat forward PE imply the market expects no earnings growth. Any further margin compression could trigger multiple contraction toward the historical low of 4.26x.
- High Volatility and Macro Sensitivity: With a beta of 1.332, TOL is 33% more volatile than the market, and the maximum drawdown of -25.27% over the observed period underscores the risk. Persistent inflation fears and elevated mortgage rates could further pressure housing demand.
TOL Technical Analysis
Toll Brothers is in a range-bound consolidation phase with a modestly positive longer-term tilt, having gained 1.73% over the past year while the S&P 500 advanced 17.22%, a stark underperformance of roughly 15.5 percentage points. At a current price of $137.34, the stock sits at approximately 31.3% of its 52-week range of $123.15 to $168.36, meaning it is trading in the lower third of its annual band and closer to the lows than the highs. This positioning signals neither momentum nor deep-value territory but rather a market that has lost conviction on the name, with the stock having surrendered most of its earlier gains after peaking near $168.36. Recent momentum has deteriorated sharply: the stock is down 7.32% over the past month and 16.33% over the past three months, a clear deceleration that diverges from the marginally positive 1-year and 6-month (4.74%) returns. The 1-month relative strength versus SPY is -8.01% and the 3-month relative strength is -22.14%, indicating the stock is being actively sold relative to the market, and the 4.03 short ratio suggests bears are not yet aggressively positioned, leaving room for further downside if sentiment sours. Key technical support rests at the 52-week low of $123.15, roughly 10.3% below the current price, while resistance is anchored at the 52-week high of $168.36, about 22.6% above. A breakdown below $123.15 would confirm a bearish trend and likely trigger momentum-driven selling, whereas a breakout above $168.36 would signal a full trend reversal and renewed institutional accumulation. With a beta of 1.332, the stock is roughly 33% more volatile than the broader market, meaning position sizing should account for amplified drawdowns; the maximum drawdown of -25.27% over the observed period underscores that volatility is not theoretical.
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
-2.1%
Cumulative gain past year
| Period | TOL Return | S&P 500 |
|---|---|---|
| 1m | -2.9% | +0.6% |
| 3m | -13.1% | +3.3% |
| 6m | +0.6% | +17.4% |
| 1y | -2.1% | +15.0% |
| ytd | +0.8% | +12.9% |
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TOL Fundamental Analysis
Toll Brothers' revenue trajectory has turned negative, with the most recent quarter (ending 2026-04-30) generating $2.531 billion in revenue, a 7.59% year-over-year decline from the $2.739 billion reported in the same quarter a year earlier. The multi-quarter trend shows deceleration: revenue fell from $3.423 billion in Q4 2025 to $2.146 billion in Q1 2026 and then to $2.531 billion in Q2 2026, and the year-over-year comparison confirms the top line is contracting rather than growing. Segment data shows Home Building contributed $2.512 billion of the $2.531 billion total, with Land adding just $18.8 million, so the entire growth story rests on the core homebuilding business, which is currently shrinking. This revenue decline is the central fundamental risk, as it suggests either softening demand, pricing pressure, or delivery timing issues in the luxury segment. Profitability remains solid but is compressing: net income in the latest quarter was $260.6 million, down from $352.4 million a year earlier, while the gross margin of 23.9% in Q2 2026 compares unfavorably to 25.75% in Q2 2025 and 26.42% in Q4 2024. The net margin of 12.28% and operating margin of 15.69% are healthy for a homebuilder, but the direction of travel is negative, with gross margin declining roughly 185 basis points year over year. The company remains firmly profitable, and the trailing EPS of $0.10 (likely reflecting a partial-period or adjusted figure) contrasts with the quarterly diluted EPS of $2.72, but the margin compression suggests cost inflation or incentives are eating into pricing power. The balance sheet is a clear strength: debt-to-equity is a conservative 0.35, the current ratio is a robust 4.17, and ROE stands at 16.28%, indicating efficient capital use. Free cash flow on a trailing-twelve-month basis is $1.215 billion, and the company returned capital aggressively with $179.6 million in stock repurchases and $24.4 million in dividends in the latest quarter alone. With $1.172 billion in cash at the end of the period and operating cash flow of $134.5 million in Q2 2026, Toll Brothers is self-funding and does not depend on external financing, which materially lowers financial risk even as the top line contracts.
Quarterly Revenue
$2.7B
2026-07
Revenue YoY Growth
-9.7%
YoY Comparison
Gross Margin
23.5%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TOL Overvalued?
Because Toll Brothers is solidly profitable with positive net income of $260.6 million in the latest quarter, the PE ratio is the appropriate primary valuation metric. The trailing PE stands at 9.92x and the forward PE at 9.93x, an unusually tight gap that implies the market is pricing in essentially flat earnings growth over the next year, consistent with the revenue decline and margin compression observed in recent quarters. This lack of a forward discount suggests investors see limited near-term earnings acceleration, which is atypical for a stock that analysts expect to earn $15.73 per share on average. On a peer-relative basis, the stock trades at a price-to-book of 1.61x, a price-to-sales of 1.22x, and an EV/EBITDA of 8.05x, all of which are modest for a homebuilder with a luxury franchise and 16.28% ROE. The PEG ratio of -0.96 is negative and therefore not meaningful given the earnings trajectory, but the low absolute multiples suggest the market is applying a discount for cyclicality and the negative revenue trend. Compared to the broader Consumer Cyclical sector, a 9.9x PE is generally in line with or slightly below homebuilder norms, implying the stock is not expensive on earnings but may be fairly valued given the deteriorating growth outlook. Historically, Toll Brothers' PE has ranged from as low as 4.26x in Q4 2023 to 19.29x in Q1 2025, with the current 9.92x sitting near the middle of that band. The price-to-sales ratio of 1.22x is near the low end of its historical range (which has spanned roughly 1.31x to 7.37x), suggesting the market is pricing in a pessimistic revenue scenario. This combination of a mid-range PE and a low-end PS implies the stock is not a screaming value on earnings but is cheap relative to sales, reflecting the market's concern that margins will continue to compress.
PE
9.9x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 2x~19x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
8.0x
Enterprise Value Multiple
Investment Risk Disclosure
Toll Brothers faces significant financial and operational risks stemming from its contracting top line and margin pressure. Revenue declined 7.59% year-over-year in Q2 2026 to $2.531 billion, and gross margin fell 185 basis points to 23.9% from 25.75% a year earlier. Net income dropped to $260.6 million from $352.4 million, and the negative PEG ratio of -0.96 reflects the market's expectation of no earnings growth. While the balance sheet is strong with a 0.35 debt-to-equity and $1.172 billion in cash, the company's profitability is highly sensitive to luxury housing demand, which could deteriorate further if mortgage rates remain elevated. The entire growth story rests on the core homebuilding segment, which contributed $2.512 billion of the $2.531 billion total revenue, leaving little diversification.
Market and competitive risks are amplified by TOL's premium valuation relative to its growth prospects and its high beta of 1.332. The stock trades at a forward PE of 9.93x, which is not expensive on an absolute basis but could compress toward the historical low of 4.26x if earnings decline. The wide analyst target range of $122.00 to $195.00 and mixed ratings—including Barclays' Underweight—signal uncertainty. Recent news highlights persistent inflation fears and a potential rotation away from AI trades into defensive sectors, but homebuilders remain vulnerable to mortgage rate sensitivity. The competitive landscape is intense, with Berkshire Hathaway's acquisition of Taylor Morrison potentially signaling consolidation and increased competition for land and buyers.
In a worst-case scenario, a continued decline in luxury housing demand, further margin compression, and a breakdown below the 52-week low of $123.15 could trigger momentum-driven selling. The analyst low target of $122.00 implies a 11.2% downside from the current price of $137.34, while a retest of the 52-week low would represent a 10.3% decline. If the stock breaks below $123.15, the next support could be significantly lower, and the maximum drawdown of -25.27% over the observed period suggests a potential drop to around $102.70 in a severe downturn. Investors could lose 10-25% from current levels in this adverse scenario, underscoring the importance of position sizing given the 1.332 beta.
FAQ
The key risks for TOL are: 1) Financial risk—revenue declined 7.59% year-over-year and gross margin fell 185 basis points to 23.9%, with further compression possible; 2) Market risk—the stock has a beta of 1.332 and a maximum drawdown of -25.27%, making it highly volatile; 3) Competitive risk—intense competition in the luxury homebuilding sector, with Berkshire Hathaway's acquisition of Taylor Morrison potentially increasing consolidation; 4) Macro risk—persistent inflation and elevated mortgage rates could suppress housing demand. The most severe risk is a prolonged housing downturn that pushes the stock below its 52-week low of $123.15, potentially causing a 10-25% loss from current levels. Investors should monitor mortgage rates and gross margin trends closely.
The 12-month forecast has three scenarios: bull case (25% probability) targeting $171.40-$195.00, base case (55% probability) targeting $137.34-$171.40, and bear case (20% probability) targeting $122.00-$123.15. The base case is most likely, assuming revenue declines moderate and margins stabilize, allowing the stock to gradually re-rate toward the analyst average target of $171.40. The bull case requires a housing rebound and successful integration of Buffington Homes, while the bear case assumes a prolonged downturn and a break below the 52-week low. The key assumption behind the base case is that gross margin holds between 23% and 24% and no major macroeconomic shocks occur.
TOL appears undervalued on a price-to-sales basis, trading at 1.22x versus a historical range of 1.31x to 7.37x, suggesting the market is pricing in a pessimistic revenue scenario. On earnings, the trailing PE of 9.92x is near the middle of its historical range (4.26x to 19.29x), so it is not a screaming value but is reasonably priced given the negative growth. The forward PE of 9.93x implies flat earnings growth, which seems overly pessimistic if the housing market stabilizes. Compared to the broader market, TOL trades at a discount, but this reflects its cyclicality and margin pressure. Overall, the stock is undervalued relative to its sales and long-term potential, but fairly valued on near-term earnings.
TOL is a good buy for value-oriented investors with a long time horizon, given its 9.92x PE, 1.22x PS, and 24.8% upside to the average analyst target of $171.40. The company is profitable with a 12.28% net margin and generates $1.215 billion in TTM free cash flow, supporting buybacks and dividends. However, the stock is down 16.33% over three months and faces revenue declines of 7.59% year-over-year, so near-term risks are high. The biggest downside risk is a break below the 52-week low of $123.15, which could lead to further losses. For risk-tolerant investors, the risk/reward is favorable, but conservative investors may want to wait for signs of margin stabilization.
TOL is more suitable for long-term investment (minimum 2-3 years) given its cyclical nature and current negative momentum. The stock has a beta of 1.332 and a maximum drawdown of -25.27%, making it volatile for short-term trading. The dividend yield is low at 0.73%, so income is not a primary attraction. However, the deep value metrics (1.22x PS, 9.92x PE) and strong balance sheet (0.35 debt-to-equity) suggest significant upside once the housing cycle turns. Short-term traders could capitalize on volatility, but the risk of further downside is high. A long-term holding period allows time for margin recovery and multiple expansion toward the analyst target of $171.40.