Monday, March 06, 2006
Get ready to read more of these...
From the Street.com
Toll Brothers (TOL:NYSE - commentary - research - Cramer's Take) is down almost 50% off of its highs. Toll Brothers is trading at around a 6.5 price-to-earnings ratio and a 15% long-term growth rate.
Toll is the "McMansion" building leader, with an average new home selling for around $660,000. It averages $113,000 in upgrades and lot premiums, a 21% increase over base prices. This has given the builder the highest average net margin of all homebuilders for the last ten years.
Toll recently reported first-quarter earnings growth of 49%. It stated that 2006 earnings would come in at $4.77 to $5.26, and that return on equity on beginning capital would be more than 30%. Toll has a supply of 87,000 lots with a record 258 selling communities. The company ended its first quarter with a backlog of $5.95 billion.
When you consider that Toll's 2004 EPS was $2.52 and the coming year's estimates are around $5.00, this is a company that is hardly headed over a cliff. Yet the market is pricing it like it is. The housing market has cooled by every measure; however, its death is greatly exaggerated.
The object is to buy low and sell high: With any multiple expansion at all, Toll is a $50 stock over the next 12 months.
Remember, being poor is bad, staying that way is stupid.
Toll Brothers (TOL:NYSE - commentary - research - Cramer's Take) is down almost 50% off of its highs. Toll Brothers is trading at around a 6.5 price-to-earnings ratio and a 15% long-term growth rate.
Toll is the "McMansion" building leader, with an average new home selling for around $660,000. It averages $113,000 in upgrades and lot premiums, a 21% increase over base prices. This has given the builder the highest average net margin of all homebuilders for the last ten years.
Toll recently reported first-quarter earnings growth of 49%. It stated that 2006 earnings would come in at $4.77 to $5.26, and that return on equity on beginning capital would be more than 30%. Toll has a supply of 87,000 lots with a record 258 selling communities. The company ended its first quarter with a backlog of $5.95 billion.
When you consider that Toll's 2004 EPS was $2.52 and the coming year's estimates are around $5.00, this is a company that is hardly headed over a cliff. Yet the market is pricing it like it is. The housing market has cooled by every measure; however, its death is greatly exaggerated.
The object is to buy low and sell high: With any multiple expansion at all, Toll is a $50 stock over the next 12 months.
Remember, being poor is bad, staying that way is stupid.
Comments:
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Robert Toll doesn't beleive in the company. $60 million in stock sales last year.
I agree that all the numbers you quote look very good but I am waiting for the knife to stop falling before I buy. There's a slew of bad news going forward which will hurt profitabilty and company valuation. TOLs land asset values are inflated and liable to being repriced. its debt is short term thus exposed to the Fed. Orders are rapidly declining and cancellations are up. While the new home market isn't exactly the same as the resale market TOLs recent high end inventory will be competing against a lot of similar inventory in the coming years. TOLhas also been getting an increasing portion of its profits from its whooly owned lending/mortgage unit and you know what is happening there. Think ECR. In short TOL is a very good company with very good management that will go through a very rough patch and survive but not with taking hits deserved and undeserved in its stock price.
I agree that all the numbers you quote look very good but I am waiting for the knife to stop falling before I buy. There's a slew of bad news going forward which will hurt profitabilty and company valuation. TOLs land asset values are inflated and liable to being repriced. its debt is short term thus exposed to the Fed. Orders are rapidly declining and cancellations are up. While the new home market isn't exactly the same as the resale market TOLs recent high end inventory will be competing against a lot of similar inventory in the coming years. TOLhas also been getting an increasing portion of its profits from its whooly owned lending/mortgage unit and you know what is happening there. Think ECR. In short TOL is a very good company with very good management that will go through a very rough patch and survive but not with taking hits deserved and undeserved in its stock price.
I truely believe TOL is the most over sold home builder, or the one with least amount of future correction in it's price - depending on which side of the fence you are on.
Toll Brothers got hammer because in a slowing market and tighter purse strings it is the luxtury homes whos sales should fall the most.
Not arguing this point.
My point is Toll Brothers made money in Luxury homes because they can!!!!
Not everyone can buy 200 acres in Potomac Maryland and build next door to the richest people in my state - Toll did.
Not everyone knows how to build a home next door to a National Park. Toll did.
They sell to the high price market, because they have the talent to fight their way into these markets. This is not a bad thing.
I have some money I need to pull from the Caribian. Thinking of putting it in Toll Brothers, or are the Indiana Pacers a better bet?
Toll Brothers got hammer because in a slowing market and tighter purse strings it is the luxtury homes whos sales should fall the most.
Not arguing this point.
My point is Toll Brothers made money in Luxury homes because they can!!!!
Not everyone can buy 200 acres in Potomac Maryland and build next door to the richest people in my state - Toll did.
Not everyone knows how to build a home next door to a National Park. Toll did.
They sell to the high price market, because they have the talent to fight their way into these markets. This is not a bad thing.
I have some money I need to pull from the Caribian. Thinking of putting it in Toll Brothers, or are the Indiana Pacers a better bet?
Pumper? No. You aren't even wrong about the fundamentals. The problem is that if stock investing were about fundamentals and perception there would have been no "tech bubble" right? Why then are you not relying on fundamentals and not relying on perception here? HB stocks are going to... I've no idea. You don't either. You kinda suspect they'll rise 30% and I kinda suspect they'll fall 30%. I think you are trying to drive through a rearview mirror. You think I'm trying to drive as if there were a baby stroller behind every light pole. I'll wait for a clear stretch where I can see far enough ahead thanks.
Gosh, how'd we do today? Good thing I wasn't listening.
TOL -4.39%
http://finance.yahoo.com/q/cp?s=%5EHGX
If being poor is bad and staying poor is stupid, what is getting poorer?
TOL -4.39%
http://finance.yahoo.com/q/cp?s=%5EHGX
If being poor is bad and staying poor is stupid, what is getting poorer?
How that TOL doing since you gave out the free advice? Better yet, how long before this blog topic disappears?
Seriously, TOL is going to bobble around and probably go down a bit more over the next few weeks but I wouldn't put my money on it. It could pop back and that could be solid or a dead cat bouncing off the side of a cliff.
three days of poorer ain't a happy place.
Seriously, TOL is going to bobble around and probably go down a bit more over the next few weeks but I wouldn't put my money on it. It could pop back and that could be solid or a dead cat bouncing off the side of a cliff.
three days of poorer ain't a happy place.
My advice to buy TOL came at $34 per share at the birth of this blog.
The blog is not mainstream thinking on investment ideas.
I don't see the point of writing a blog on mainstream views.
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The blog is not mainstream thinking on investment ideas.
I don't see the point of writing a blog on mainstream views.
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