On Thursday, Wolfe Research increased its price target for Toll Brothers (NYSE:TOL) shares to $135 from $123, while maintaining an Outperform rating. The firm noted that Toll Brothers' stock has seen significant growth, outpacing both its industry peers and broader market indices. Year-to-date, the company's shares have risen by 16%, compared to a 4% increase within the Homebuilder group and an 11% rise in the S&P 500 index.
In 2023, Toll Brothers' stock performance was notable, with a gain of 106%, surpassing the Homebuilder group's 81% and the S&P's 24%. The current trading price of Toll Brothers' shares stands at $119.20, with a year-to-date high of $134.92 and a low of $95.98.
According to Wolfe Research, the stock is trading at 8.3 times their 2024 earnings per share estimate, which is 14% above the company's trailing five-year average but 23% below the long-term average.
Wolfe Research highlighted that Toll Brothers is trading at 1.6 times their fiscal year 2024 book value estimate and 1.4 times their fiscal year 2025 estimate, comparing favorably with the trailing five-year average of 1.0 times. The firm believes that as long as Toll Brothers continues to demonstrate a structurally higher margin profile compared to pre-COVID levels, the stock should trade at the higher end or above its five-year averages.
The analyst's commentary suggests that the projected 2024 return on assets (ROA) of 11.7% for Toll Brothers implies a 1.8 times book value multiple. Wolfe Research's new price target of $135 reflects this multiple, which is in line with the implied multiple based on their 2024 ROA estimate.
InvestingPro Insights
As Wolfe Research updates its outlook on Toll Brothers, incorporating real-time metrics can provide investors with a comprehensive understanding of the company's financial health.
Toll Brothers currently boasts a market capitalization of $12.44 billion and is trading at a P/E ratio of 8.14, indicating that the stock may be undervalued relative to near-term earnings growth. The P/E ratio has adjusted slightly to 7.75 over the last twelve months as of Q2 2024, aligning with the company's recent trend of strong performance.
InvestingPro Tips highlight that Toll Brothers has not only raised its dividend for three consecutive years but has also maintained dividend payments for eight consecutive years. This consistent return to shareholders is coupled with a substantial price uptick over the last six months, where the stock delivered a 40.27% return, further solidifying its growth trajectory. Moreover, the company's liquid assets surpass its short-term obligations, suggesting a solid financial footing for near-term operations.
For investors seeking further insights and additional tips, there are 13 more InvestingPro Tips available for Toll Brothers, which can be accessed through the dedicated InvestingPro page for a deeper dive into the company's performance and outlook. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing even more value to your investment research process.
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