Today I will examine Toll Brothers, Inc.'s (NYSE:TOL) latest earnings update (31 January 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of TOL's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
How Did TOL's Recent Performance Stack Up Against Its Past?
TOL's trailing twelve-month earnings (from 31 January 2019) of US$728m has jumped 22% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 20%, indicating the rate at which TOL is growing has accelerated. What's the driver of this growth? Let's see whether it is only due to an industry uplift, or if Toll Brothers has seen some company-specific growth.
In terms of returns from investment, Toll Brothers has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 7.2% exceeds the US Consumer Durables industry of 6.8%, indicating Toll Brothers has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Toll Brothers’s debt level, has increased over the past 3 years from 6.2% to 9.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 86% to 74% over the past 5 years.
What does this mean?
Though Toll Brothers's past data is helpful, it is only one aspect of my investment thesis. While Toll Brothers has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Toll Brothers to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TOL’s future growth? Take a look at our free research report of analyst consensus for TOL’s outlook.
- Financial Health: Are TOL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 January 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.