NYSE:TOL, an undervalued stock with good fundamentals.

Last update: Oct 11, 2023

TOLL BROTHERS INC (NYSE:TOL) was identified as a decent value stock by our stock screener. NYSE:TOL scores well on profitability, solvency and liquidity. At the same time it seems to be priced very reasonably. We'll explore this a bit deeper below.

Deciphering NYSE:TOL's Valuation Rating

ChartMill employs its own Valuation Rating system for all stocks. This score, ranging from 0 to 10, is determined by evaluating different valuation factors, including price to earnings and free cash flow, both in absolute terms and relative to the market and industry. NYSE:TOL has earned a 9 for valuation:

Based on the Price/Earnings ratio of 5.71, the valuation of TOL can be described as very cheap.
Compared to the rest of the industry, the Price/Earnings ratio of TOL indicates a rather cheap valuation: TOL is cheaper than 85.07% of the companies listed in the same industry.
TOL's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 25.88.
With a Price/Forward Earnings ratio of 6.30, the valuation of TOL can be described as very cheap.
Based on the Price/Forward Earnings ratio, TOL is valued cheaper than 83.58% of the companies in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 18.97, TOL is valued rather cheaply.
80.60% of the companies in the same industry are more expensive than TOL, based on the Enterprise Value to EBITDA ratio.
TOL's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. TOL is cheaper than 79.10% of the companies in the same industry.
TOL's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
TOL has an outstanding profitability rating, which may justify a higher PE ratio.

Analyzing Profitability Metrics

ChartMill utilizes a Profitability Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of profitability ratios and margins, both in absolute terms and in comparison to industry peers. NYSE:TOL has earned a 8 out of 10:

Looking at the Return On Assets, with a value of 12.69%, TOL belongs to the top of the industry, outperforming 82.09% of the companies in the same industry.
The Return On Equity of TOL (23.41%) is better than 85.07% of its industry peers.
TOL has a better Return On Invested Capital (14.64%) than 82.09% of its industry peers.
The 3 year average ROIC (8.48%) for TOL is below the current ROIC(14.64%), indicating increased profibility in the last year.
TOL has a Profit Margin of 14.66%. This is amongst the best in the industry. TOL outperforms 89.55% of its industry peers.
TOL's Profit Margin has improved in the last couple of years.
TOL's Operating Margin of 17.37% is amongst the best of the industry. TOL outperforms 86.57% of its industry peers.
In the last couple of years the Operating Margin of TOL has grown nicely.
In the last couple of years the Gross Margin of TOL has grown nicely.

Health Analysis for NYSE:TOL

ChartMill assigns a proprietary Health Rating to each stock. The score is computed by evaluating various liquidity and solvency ratios and ranges from 0 to 10. NYSE:TOL was assigned a score of 8 for health:

An Altman-Z score of 3.77 indicates that TOL is not in any danger for bankruptcy at the moment.
TOL's Altman-Z score of 3.77 is fine compared to the rest of the industry. TOL outperforms 68.66% of its industry peers.
TOL has a debt to FCF ratio of 1.54. This is a very positive value and a sign of high solvency as it would only need 1.54 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 1.54, TOL is doing good in the industry, outperforming 68.66% of the companies in the same industry.
TOL has a Debt/Equity ratio of 0.42. This is a healthy value indicating a solid balance between debt and equity.
A Current Ratio of 3.85 indicates that TOL has no problem at all paying its short term obligations.
Looking at the Current ratio, with a value of 3.85, TOL is in the better half of the industry, outperforming 67.16% of the companies in the same industry.
The current and quick ratio evaluation for TOL is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Growth Analysis for NYSE:TOL

ChartMill assigns a Growth Rating to each stock, ranging from 0 to 10. This rating is determined by analyzing different growth elements, including EPS and revenue growth, spanning both historical and future figures. In the case of NYSE:TOL, the assigned 5 reflects its growth potential:

The Earnings Per Share has grown by an impressive 53.43% over the past year.
Measured over the past years, TOL shows a very strong growth in Earnings Per Share. The EPS has been growing by 27.41% on average per year.
TOL shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 11.27%.
TOL shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 12.06% yearly.

Our Decent Value screener lists more Decent Value stocks and is updated daily.

Check the latest full fundamental report of TOL for a complete fundamental analysis.

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.