U.S. Markets closed

Will Toll Brothers, Inc.'s (NYSE:TOL) Earnings Grow Over The Next Year?

Simply Wall St

On 31 July 2019, Toll Brothers, Inc. (NYSE:TOL) released its most recent earnings update. Generally, analyst consensus outlook seem pessimistic, with earnings expected to decline by 17% in the upcoming year compared with the past 5-year average growth rate of 19%. With trailing-twelve-month net income at current levels of US$748m, the consensus growth rate suggests that earnings will decline to US$623m by 2020. Below is a brief commentary around Toll Brothers's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for Toll Brothers

Can we expect Toll Brothers to keep growing?

The view from 16 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of TOL's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NYSE:TOL Past and Future Earnings, August 23rd 2019

This results in an annual growth rate of 2.3% based on the most recent earnings level of US$748m to the final forecast of US$697m by 2022. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $4.39 in the final year of forecast compared to the current $4.92 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 10% to 9.2% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Toll Brothers, there are three essential factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Toll Brothers worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Toll Brothers is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Toll Brothers? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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 editorial-team@simplywallst.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.