Should Value Investors Buy Toll Brothers (TOL) Stock?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is Toll Brothers (TOL). TOL is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 10.41 right now. For comparison, its industry sports an average P/E of 11.39. Over the last 12 months, TOL's Forward P/E has been as high as 15.40 and as low as 3.52, with a median of 9.78.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. TOL has a P/S ratio of 0.93. This compares to its industry's average P/S of 0.96.
These are just a handful of the figures considered in Toll Brothers's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that TOL is an impressive value stock right now.
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