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TOL STOCK WRITE UP


TOL (TOLL BROTHERS)

  • P/E: 17.3
  • GAAP DILUTED YEAR-OVER-YEAR EPS GROWTH LAST QUARTER: $.22
  • SECTOR: CONSUMER DURABLES
  • ASSETS-LIABILITIES: 1.83
  • DIVIDEND: .84%
Toll Brothers, INC, (TOL), is a housing manufacturer. Although their stock posted a beat on EPS and revenue expectations in Q2 '17, which reported today, the stock went down due to concerns over the housing market, as housing sales slumped unexpectedly in April. The share price is linked to housing market expectations, and it will be difficult for the stock to trade up should the housing market falter.
While revenues increased 22% in Q2 '17 from the comparable '16 quarter, revenues in Q1 were down on a year-over-year basis. Costs increased and gross margin shrank slightly while the company delivered a substantial EPS growth of $.22 per share to $.73. The company's backlog of orders grew 25%. Total debt increased, and the company increased its cash pile to cut net debt. In each of the last 3 quarters, TOL has beat Wall Street expectations for EPS, and beat revenue expectations dating back to Q4 '15.
CNBC reported that consumer confidence in the housing market dropped in March 2017, after hitting an all-time high in February of this year. Robert Toll, one of the company's founders and namesake, still serves as company chairman. In 2010, Douglas Yearley assumed command, having worked for the company since 1990. He holds a JD and BS, and left his career in law in 1990 directly for Toll brothers. Since 2010, Toll has acquired Camwest development, Shapewell, and Coleman homes, expanding their available market beyond their native Pennsylvania. As the housing market has expanded, Toll brothers increased their spending and boosted revenues, sacrificing some gross margins in the process.
TOL has a P/E of 17.3, which is low compared to the average stock, but on the higher range of its competitors. However, the company is growing at a fast rate, and beat Wall Street expectations handily with its last quarter report. Will expectations drive the share price higher, or will doubt over the housing market fueled by the recent report of decline in the housing market drive down TOL with expectations for the industry? The share price will tell the story.










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