TOL

Based on a comprehensive analysis, Tol Group (TOL) presents a compelling growth opportunity with manageable risks for investors seeking exposure to the housing sector.

Technical & Fundamental Outlook TOL exhibits strong bullish momentum, trading near its 52-week high after significantly outperforming the market. Fundamentally, the company shows robust revenue growth, improved profitability, and a very strong balance sheet with low debt. Its operational metrics are typical for a homebuilder, with efficiency supported by good fixed asset utilization.

Valuation & Risk Assessment The stock appears undervalued, trading at an attractive forward P/E of 7.3 and a very low PEG ratio, signaling strong growth potential relative to its price. The primary risk is its high volatility (beta of 1.43), which implies larger swings than the market, tied to the cyclical nature of the housing industry.

Recommendation Considering the strong price momentum, healthy fundamentals, and compelling valuation, TOL is a BUY. The low PEG ratio suggests the market has not yet fully priced in its earnings growth potential. Investors should be prepared for sector-related volatility, but the overall financial health and growth trajectory support a positive outlook.

*This is not investment advice. Please conduct your own research before making any decisions.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive analysis, TOL's 12-month outlook is positive, supported by strong fundamentals and an attractive valuation, though it will be sensitive to housing market cycles.

Key Catalysts & Outlook: The primary catalyst is the potential for earnings growth to outpace the current stock price, as signaled by the very low PEG ratio. Strong revenue growth, high profitability, and a robust balance sheet position TOL to capitalize on any sustained demand in the housing market, suggesting upward price momentum is likely to continue.

Potential Risks: The main risk is the stock's high volatility (beta of 1.43), which makes it susceptible to larger swings based on interest rate changes, economic data, and broader housing sector sentiment. A significant economic slowdown could dampen housing demand and negatively impact performance.

Valuation & Target: With the stock appearing fundamentally undervalued on a forward P/E basis and no specific analyst target provided, a conservative 12-month target range would be $160-$180, representing a potential upside of approximately 8-21% from the current price.

Wall Street Consensus

Most Wall Street analysts are optimistic about TOL's 12-month outlook, with consensus target around $144.92, indicating expected upside potential.

Overall, TOL has investment potential but also faces challenges. Here are key factors to weigh before investing.

TOL has demonstrated exceptionally strong performance with an impressive 15.6% gain over the past three months, significantly outpacing the broader market. The stock currently trades very near its 52-week high of $149.80, reflecting sustained bullish momentum despite experiencing a substantial 35.67% maximum drawdown during the past year.

Short-term performance remains robust with a 6.43% monthly gain, building on the strong quarterly momentum. More notably, TOL has outperformed the market by a remarkable 12.23 percentage points over three months, showcasing exceptional relative strength given its beta of 1.428 indicates higher-than-market volatility.

Currently trading at $148.81, TOL sits just 0.66% below its 52-week high, positioning it in technically overbought territory. This proximity to its peak suggests limited immediate upside resistance but also indicates potential vulnerability to profit-taking given the substantial rally from its $86.67 low.

Revenue & Profitability TOL demonstrated sequential revenue growth in Q4 2025, rising to $3.42 billion from $2.95 billion in Q3. Profitability metrics improved, with the net profit margin increasing to 13.0% from 12.6%, reflecting stronger operational leverage. The company's gross profit ratio remained stable at approximately 26%, indicating consistent pricing power or cost control.

Financial Health The company exhibits a strong liquidity position, with a robust current ratio of 3.46, significantly supported by a high cash-per-share of $13.01. TOL maintains a moderate debt profile, evidenced by a low debt-to-equity ratio of 0.35 and a total debt-to-capitalization ratio of just 26%. The capital structure suggests a conservative approach to leverage and substantial financial flexibility.

Operational Efficiency TOL's operational efficiency is mixed; while the asset turnover ratio is modest at 0.24, the return on equity is a respectable 5.4%. The inventory turnover ratio is notably low at 0.24, resulting in 379 days of inventory outstanding, which is typical for a homebuilder but indicates significant capital tied up in unsold homes. The fixed asset turnover of 8.95 suggests efficient utilization of property, plant, and equipment.

Valuation Level Analysis

TOL's current valuation metrics suggest the stock is trading at attractive levels, particularly when considering forward-looking estimates. The forward P/E of 7.3 is significantly below the TTM P/E of 10.5, indicating strong earnings growth expectations. Furthermore, the low PEG ratio of approximately 0.32, which is well below 1.0, strongly signals that the stock is undervalued relative to its earnings growth potential. The price-to-sales ratio of 1.29 also appears reasonable for a company in the homebuilding sector.

Peer Comparison Analysis

A direct peer comparison cannot be performed as industry average data was not provided in the query. However, TOL's valuation multiples can be assessed on a standalone basis. The forward P/E of 7.3 and PEG ratio below 0.5 are typically considered very attractive, suggesting the stock may be undervalued even without specific industry benchmarks. The EV/EBITDA ratio of 24.0 appears elevated, which may warrant further investigation into the company's debt levels and capital structure compared to peers.

Volatility Risk: TOL exhibits materially higher volatility than the broader market, as evidenced by its beta of 1.428. This amplified sensitivity is further confirmed by a significant 1-year maximum drawdown of -35.67%, indicating substantial downside risk during market downturns. Investors should be prepared for pronounced price swings relative to the overall market.

Other Risks: The stock's primary risk lies not in short-term speculative pressure, as indicated by the absence of reported short interest, but in its inherent exposure to the cyclical housing market. Potential risks include economic sensitivity affecting buyer demand, interest rate fluctuations impacting affordability, and sector-specific headwinds like supply chain or labor cost inflation, which are not fully captured by standard short-interest metrics.