Toll Brothers
TOL
$161.03
+6.67%
Toll Brothers, Inc. is a leading American luxury homebuilder operating in the residential construction sector, designing, building, and selling high-end single-family detached and attached homes in over 60 markets across 24 states. The company's distinct competitive identity is as the premier luxury homebuilder in the United States, commanding an average sale price significantly above its public competitors and consistently ranking among the top 10 builders nationally by total home closings. The current investor narrative is driven by the company's robust financial performance, including strong earnings and aggressive share buybacks, positioning it as a beneficiary of a potential market rotation away from crowded growth sectors into more defensive, asset-backed plays, amidst a backdrop of a persistent structural housing shortage. Recent headlines highlight its strategic expansion, such as the acquisition of Buffington Homes in Northwest Arkansas, to capture growth in new luxury markets.…
TOL
Toll Brothers
$161.03
Related headlines
Investment Opinion: Should I buy TOL Today?
Rating & Thesis: TOL is a Buy. The core thesis is that the premier luxury homebuilder is executing strongly with double-digit revenue growth, trades at a compelling valuation relative to its history and peers, and is well-positioned to benefit from a structural housing shortage, making it an attractive GARP (Growth at a Reasonable Price) opportunity within a cyclical sector. This aligns with the bullish analyst sentiment (Overweight/Buy ratings from JP Morgan, UBS, RBC) and the consensus EPS target of $16.00.
Supporting Evidence: The buy rating is supported by four key data points: 1) A forward P/E of 11.01x is below typical sector multiples, suggesting undervaluation. 2) Revenue growth is accelerating at 15.4% YoY. 3) Profitability is solid with a net margin near 10% and an ROE of 16.28%. 4) The balance sheet is exceptionally strong with a debt-to-equity of 0.35 and $1.45B in TTM FCF, funding aggressive buybacks. The implied upside to the analyst EPS target of $16.00, applied to a conservative 11x multiple, suggests a base case target near $176.
Risks & Conditions: The two biggest risks are a sharp downturn in housing demand from higher interest rates and sustained margin compression below 22%. This Buy rating would downgrade to Hold if quarterly revenue growth decelerates below 5% or if the forward P/E expands above 15x without corresponding earnings growth. It would downgrade to Sell if net margins contract below 7% or if the stock breaks below key technical support at $130 on deteriorating fundamentals. Based on the current data, TOL appears fairly valued to slightly undervalued relative to its growth profile and peer set.
Sign up to view all
TOL 12-Month Price Forecast
The AI assessment is bullish with medium confidence. The confluence of strong growth, a cheap valuation, and a robust balance sheet creates a favorable risk/reward setup. The medium confidence stems from the stock's high beta (1.367) and cyclical nature, which make it susceptible to macro shocks. The stance would upgrade to bullish with high confidence if the company demonstrates margin recovery in the next quarter or if leading housing indicators (like mortgage applications) show sustained strength. It would downgrade to neutral if technical momentum breaks (e.g., a close below $140) concurrent with deteriorating sector data.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Toll Brothers's 12-month outlook, with a consensus price target around $209.34 and implied upside of +30.0% versus the current price.
Average Target
$209.34
5 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
5
covering this stock
Price Range
$129 - $209
Analyst target range
Analyst coverage for TOL appears limited in the provided data, with only 5 analysts contributing to estimates for revenue and EPS. The consensus revenue estimate for the period is approximately $11.80 billion, with a tight range between $11.65B and $11.94B. The average EPS estimate is $16.00, ranging from $15.33 to $16.34. This limited coverage suggests TOL, despite its size, may not be as widely followed as mega-cap stocks, which can lead to higher volatility and potential mispricing opportunities. The provided institutional ratings show a generally bullish sentiment among the firms that do cover the stock. Recent actions from firms like JP Morgan (Overweight), UBS (Buy), RBC Capital (Outperform), and Wells Fargo (Overweight) indicate strong buy-side conviction. The absence of Sell or Underweight ratings in the recent data, with most firms maintaining Outperform or Market Perform ratings, signals that analyst sentiment is leaning positive. The tight range in EPS estimates (a spread of just over $1.00) indicates a relatively high degree of conviction in near-term earnings projections among the covering analysts.
Bulls vs Bears: TOL Investment Factors
The evidence currently leans bullish, supported by strong fundamentals, attractive valuation, and powerful momentum. The bull case is anchored in TOL's robust 15.4% revenue growth, fortress balance sheet, and compelling valuation below peers and its own history. However, the bear case presents credible risks centered on the stock's high cyclical volatility (beta 1.367), recent margin compression, and sensitivity to macroeconomic headwinds. The single most important tension in the investment debate is whether TOL's luxury positioning and operational strength can insulate it from a potential housing downturn or interest rate-driven slowdown, allowing it to sustain its current growth and margin profile. If it can, the stock's low multiple offers significant upside; if not, its high beta exposes it to substantial downside.
Bullish
- Strong Revenue Growth & Profitability: Q1 FY2026 revenue grew 15.4% YoY to $2.15B, demonstrating resilience in the luxury housing market. The company maintains robust profitability with a net margin of 9.83% and generated $1.45B in TTM free cash flow, enabling self-funded growth and shareholder returns.
- Compelling Valuation vs. Peers & History: TOL trades at a trailing P/E of 9.92x and forward P/E of 11.01x, below typical sector multiples for profitable homebuilders. Its current P/E sits near the lower end of its historical range (5x-19x), suggesting it is not priced for perfection and offers a value opportunity.
- Fortress Balance Sheet & Capital Returns: The company has a strong balance sheet with a debt-to-equity ratio of 0.35 and a current ratio of 4.17, indicating minimal financial risk. Substantial FCF supports aggressive share buybacks and a sustainable dividend (7.2% payout ratio), enhancing shareholder value.
- Powerful Technical Momentum: The stock is in a sustained uptrend, up 47.62% over the past year and 25.40% over the past month, significantly outperforming the S&P 500. It trades at 92% of its 52-week high, indicating strong bullish momentum and market rotation into the sector.
Bearish
- High Cyclical Volatility & Beta: With a beta of 1.367, TOL is approximately 37% more volatile than the broader market, reflecting its sensitivity to economic cycles, interest rates, and housing sentiment. The stock has experienced a maximum drawdown of -25.27%, highlighting significant downside risk during downturns.
- Margin Compression in Recent Quarter: Q1 FY2026 gross margin of 22.84% is notably below the 30.30% level seen in Q2 FY2024, indicating potential cost pressures or a shift in product mix. While still healthy, a sustained decline in margins could pressure earnings growth and valuation multiples.
- Proximity to Key Technical Resistance: Trading at $155.67, the stock is near its 52-week high of $168.36. The sharp 25.4% one-month rally raises the risk of a short-term overextension and potential consolidation or pullback, especially if broader market conditions deteriorate.
- Limited Analyst Coverage & Concentration: Only 5 analysts provide estimates for TOL, which can lead to higher volatility and potential mispricing due to lower institutional scrutiny. The company's revenue is concentrated in the cyclical residential construction sector, exposing it to sector-specific downturns.
TOL Technical Analysis
The stock is in a sustained uptrend with a powerful 1-year price change of +47.62%, significantly outpacing the S&P 500's 24.99% gain. As of the latest close of $155.67, TOL is trading near the upper end of its 52-week range, approximately 92% of the way from its low of $105.65 to its high of $168.36, indicating strong momentum but also proximity to a key resistance level which may signal a potential consolidation or pullback. The stock's beta of 1.367 indicates it is approximately 37% more volatile than the broader market, which is typical for a cyclical homebuilder and underscores the need for careful risk management. Recent momentum has been exceptionally strong, with the stock surging 25.40% over the past month and 17.93% over the past three months, significantly outperforming the S&P 500's respective gains of 0.74% and 15.14%. This acceleration suggests the bullish trend is intact and potentially gaining steam, though the sharp one-month move raises the possibility of short-term overextension. The relative strength figures, such as a 1-month relative strength of +24.66%, confirm the stock is in a powerful uptrend relative to the market. Key technical support is anchored at the 52-week low of $105.65, while immediate resistance lies at the 52-week high of $168.36. A decisive breakout above $168.36 would signal a continuation of the bullish trend, while a failure to hold recent gains could see a retest of lower support levels. The stock has experienced a maximum drawdown of -25.27% over the observed period, highlighting its inherent volatility; a beta of 1.367 confirms it moves with greater amplitude than the market, which investors must factor into position sizing.
Beta
1.37
1.37x market volatility
Max Drawdown
-25.3%
Largest decline past year
52-Week Range
$111-$168
Price range past year
Annual Return
+42.1%
Cumulative gain past year
| Period | TOL Return | S&P 500 |
|---|---|---|
| 1m | +19.9% | -1.7% |
| 3m | +20.9% | +13.7% |
| 6m | +15.7% | +6.2% |
| 1y | +42.1% | +20.8% |
| ytd | +18.8% | +7.5% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
TOL Fundamental Analysis
Toll Brothers is demonstrating robust revenue growth, with Q1 FY2026 (ending Jan 31, 2026) revenue of $2.15 billion, representing a significant 15.4% year-over-year increase. This growth is broad-based, with the core Home Building segment generating $1.85 billion and the Land segment contributing $290.6 million in the latest quarter. The multi-quarter trend shows revenue has grown from $1.86 billion in Q1 FY2025 to the current $2.15 billion, indicating a consistent and accelerating top-line expansion, which underpins the bullish investment case for the luxury housing market's resilience. The company is highly profitable, with Q1 FY2026 net income of $210.9 million and a trailing twelve-month free cash flow of $1.45 billion. Gross margin for the quarter was 22.84%, while the operating margin stood at 10.21%. While the Q1 gross margin of 22.84% is slightly below the levels seen in FY2024 (e.g., 30.30% in Q2 FY2024), it remains healthy for the industry, and the net margin of 9.83% demonstrates efficient conversion of revenue to bottom-line earnings. The company's profitability is solid and stable. Toll Brothers maintains a fortress balance sheet with a strong current ratio of 4.17 and a conservative debt-to-equity ratio of 0.35, indicating minimal financial risk. The return on equity (ROE) of 16.28% is robust, reflecting efficient use of shareholder capital. With substantial free cash flow generation of $1.45 billion (TTM), the company is fully self-funding its growth, share buybacks, and dividends, as evidenced by its low payout ratio of 7.2%, reducing reliance on external financing and providing a significant margin of safety.
Quarterly Revenue
$2.1B
2026-01
Revenue YoY Growth
+0.15%
YoY Comparison
Gross Margin
+0.22%
Latest Quarter
Free Cash Flow
$1.5B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is TOL Overvalued?
Given TOL's positive net income, the primary valuation metric is the Price-to-Earnings (PE) ratio. The trailing PE ratio is 9.92x, while the forward PE is slightly higher at 11.01x. The modest premium of the forward PE suggests the market is pricing in continued, but not explosive, earnings growth, aligning with the company's steady performance trajectory. Compared to industry averages, TOL's valuation appears compelling. Its trailing PE of 9.92x and forward PE of 11.01x are below the typical sector multiples for profitable homebuilders, which often trade in the low-to-mid teens. The Price-to-Sales (PS) ratio of 1.22x and Enterprise Value-to-Sales (EV/Sales) of 1.46x further suggest the stock is not overvalued relative to its revenue base, especially considering its luxury positioning and above-average margins. Historically, TOL's current trailing PE of 9.92x sits well below its own historical range observed in recent quarters, which has seen peaks above 19x (Q1 FY2025) and has generally fluctuated between 5x and 19x over the past few years. This positions the stock near the lower end of its historical valuation band, suggesting it is not priced for perfection and may offer a value opportunity if the company can sustain its current growth and profitability metrics, barring a severe housing downturn.
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
Financial & Operational Risks: TOL's primary financial risk is not leverage—its debt-to-equity of 0.35 is conservative—but rather earnings volatility tied to the housing cycle and potential margin pressure. The Q1 gross margin of 22.84% represents a meaningful compression from prior peaks above 30%, which, if sustained, could jeopardize the net margin of 9.83%. While revenue growth is strong at 15.4% YoY, the company's valuation relies on this growth continuing; a deceleration could trigger multiple compression given its cyclical nature. The concentration in luxury residential construction, despite geographic diversification, remains a single-sector exposure.
Market & Competitive Risks: The stock trades at a forward P/E of 11.01x, which is below sector averages but has expanded significantly during its 47.62% annual rally. This creates valuation compression risk if investor sentiment shifts away from cyclical or defensive rotations. The beta of 1.367 confirms high correlation with market swings, and the sector faces competitive pressures and regulatory scrutiny. Macro risks are paramount: persistent inflation (as noted in recent news) could keep interest rates elevated, directly impacting mortgage affordability for luxury homebuyers and potentially stalling the current housing momentum.
Worst-Case Scenario: The worst-case scenario involves a sharp economic slowdown coupled with a spike in mortgage rates, leading to a severe contraction in luxury housing demand. This would trigger order cancellations, price cuts, and significant margin erosion. In this adverse scenario, TOL's earnings could fall sharply, and its P/E multiple could contract toward the lower end of its historical range (around 5x). The stock could realistically revisit its 52-week low of $105.65, representing a potential downside of approximately -32% from the current price of $155.67. The maximum historical drawdown of -25.27% provides a benchmark for the volatility inherent in such a downturn.
FAQ
The key risks are: 1) Macroeconomic & Interest Rate Risk: As a homebuilder with a beta of 1.37, TOL is highly sensitive to rising mortgage rates and economic slowdowns, which can crush demand. 2) Margin Risk: Q1 gross margin of 22.84% shows compression from prior highs; sustained pressure would hurt earnings. 3) Cyclical Volatility Risk: The stock has a max drawdown of -25.27%, meaning significant price swings are inherent. 4) Execution & Acquisition Risk: Integrating new acquisitions like Buffington Homes carries operational challenges. Of these, a sharp rise in interest rates posing a macro threat is the most severe near-term risk.
The 12-month forecast is scenario-based. The Base Case (55% probability) targets $160-$175, assuming TOL meets analyst EPS consensus of $16.00 and trades at a reasonable multiple. The Bull Case (30% probability) targets $176-$185, driven by margin recovery, rate cuts, and sustained momentum. The Bear Case (15% probability) targets $105-$130, triggered by a housing recession and multiple compression. The most likely scenario is the Base Case, anchored on the assumption that the current economic environment persists without a sharp downturn. The average analyst EPS estimate of $16.00 is a key benchmark for these forecasts.
TOL appears fairly valued to slightly undervalued. Its forward P/E of 11.01x is below the typical multiples for profitable homebuilders and sits near the lower end of its own historical range of 5x to 19x. The Price-to-Sales ratio of 1.22x and EV/Sales of 1.46x further suggest the market is not overpaying for its revenue base. The valuation implies the market expects moderate growth and some cyclical headwinds, but does not price in a severe downturn or significant margin expansion. Compared to its growth rate and profitability, the current multiple offers a margin of safety.
TOL presents a compelling buy opportunity for investors comfortable with cyclical volatility. The stock offers an attractive combination of 15.4% revenue growth, a fortress balance sheet (D/E 0.35), and a valuation (11x forward P/E) that is below its historical range and sector peers. The primary downside risk is a housing downturn, which could see the stock fall towards its 52-week low of $105.65 (-32% downside). For long-term investors seeking GARP exposure to housing, TOL is a good buy on pullbacks. Short-term traders should be cautious due to its high beta and proximity to technical resistance.
TOL is more suitable for a medium-to-long-term investment horizon (2+ years) rather than short-term trading. While it has exhibited strong short-term momentum (+25% in 1 month), its high beta of 1.367 and cyclical nature make it volatile and unpredictable over weeks or months. Long-term investors can benefit from the structural housing shortage thesis, the company's market leadership, and its capital return program. The low dividend yield (0.73%) indicates it is not an income stock. A minimum holding period of 12-18 months is suggested to navigate through potential economic cycles and allow the fundamental story to play out.