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Toll Brothers, Inc. (NYSE:TOL), which is in the consumer durables business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $39.22 at one point, and dropping to the lows of $34.49. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Toll Brothers's current trading price of $37.58 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Toll Brothers’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Toll Brothers worth?
According to my valuation model, Toll Brothers seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Toll Brothers today, you’d be paying a fair price for it. And if you believe the company’s true value is $44.52, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Toll Brothers’s low beta implies that the stock is less volatile than the wider market.
What does the future of Toll Brothers look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -10% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Toll Brothers. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, TOL appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on TOL for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on TOL should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Toll Brothers. You can find everything you need to know about Toll Brothers in the latest infographic research report. If you are no longer interested in Toll Brothers, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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 email@example.com. 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.