Value
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.6 |
| P/S | 9.4 |
| EV/EBITDA | 6.4 |
| Fwd P/E | 9.1 |
| PEG | 6.8 |
| Analyst target | 4.0 |
- ▸Forward P/E: 11.1x
- ▸PEG: 1.05
- ▸Attractively valued
TOL · Why this verdict
Why Toll Brothers (TOL) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.7/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
A forward price-to-earnings ratio of 10.5x and a debt-to-equity ratio that receives a positive score component suggest Toll Brothers is priced modestly relative to its normalized earnings capacity in the luxury segment. Valuation breakdown | Forward price-to-earnings multiple expands above 12x within 12 months as housing supply constraints support pricing. | →Stable |
| CounterHomebuilder multiples are historically low because earnings are cyclical; the current valuation may reflect rational skepticism about earnings sustainability into a prolonged high-rate environment rather than a discount. | ||
Toll Brothers has beaten earnings estimates in three of the last four quarters, yet revenue declined 8% year over year, suggesting that margin discipline and cost control are supporting earnings even as the top line contracts. Growth breakdown | Revenue declines stabilize to less than 5% year over year within the next 2 quarters as the housing market absorbs higher mortgage rates. | →Stable |
| CounterRevenue declines of 8% in a homebuilder often signal order cancellations or pricing pressure that eventually flow through to earnings, meaning beats today may reflect sell-through of earlier orders that won't recur. | ||
Analyst sentiment scored 7.33 out of 10 and news sentiment was positive at a score of +0.31 across eight recent articles, indicating that market commentary around Toll Brothers is broadly constructive despite mixed fundamentals. Sentiment breakdown | Analyst ratings remain predominantly positive and news sentiment score stays above 0 over the next 6 months. | →Stable |
| CounterNews sentiment is a lagging indicator in cyclical housing stocks; positive coverage at a peak often precedes a period of downward revisions as macro headwinds become more visible to analysts. | ||
The stock has already reached its analyst consensus price target at current levels, with upside of only 0.6%, meaning further price appreciation requires either analyst target upgrades or a correction that creates a new entry point. Warnings | Analyst price targets rise above $160 per share, more than 7% above the current $148.71, driven by earnings upside or improved housing market data. | →Stable |
| CounterA stock trading at its analyst target is not inherently a sell; it may simply mean current pricing is fair value, and new catalysts such as lower rates could quickly drive target upgrades. | ||
A forward price-to-earnings ratio of 10.5x and a debt-to-equity ratio that receives a positive score component suggest Toll Brothers is priced modestly relative to its normalized earnings capacity in the luxury segment.
→StableValuation breakdown
- Expectation
- Forward price-to-earnings multiple expands above 12x within 12 months as housing supply constraints support pricing.
CounterHomebuilder multiples are historically low because earnings are cyclical; the current valuation may reflect rational skepticism about earnings sustainability into a prolonged high-rate environment rather than a discount.
Toll Brothers has beaten earnings estimates in three of the last four quarters, yet revenue declined 8% year over year, suggesting that margin discipline and cost control are supporting earnings even as the top line contracts.
→StableGrowth breakdown
- Expectation
- Revenue declines stabilize to less than 5% year over year within the next 2 quarters as the housing market absorbs higher mortgage rates.
CounterRevenue declines of 8% in a homebuilder often signal order cancellations or pricing pressure that eventually flow through to earnings, meaning beats today may reflect sell-through of earlier orders that won't recur.
Analyst sentiment scored 7.33 out of 10 and news sentiment was positive at a score of +0.31 across eight recent articles, indicating that market commentary around Toll Brothers is broadly constructive despite mixed fundamentals.
→StableSentiment breakdown
- Expectation
- Analyst ratings remain predominantly positive and news sentiment score stays above 0 over the next 6 months.
CounterNews sentiment is a lagging indicator in cyclical housing stocks; positive coverage at a peak often precedes a period of downward revisions as macro headwinds become more visible to analysts.
The stock has already reached its analyst consensus price target at current levels, with upside of only 0.6%, meaning further price appreciation requires either analyst target upgrades or a correction that creates a new entry point.
→StableWarnings
- Expectation
- Analyst price targets rise above $160 per share, more than 7% above the current $148.71, driven by earnings upside or improved housing market data.
CounterA stock trading at its analyst target is not inherently a sell; it may simply mean current pricing is fair value, and new catalysts such as lower rates could quickly drive target upgrades.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Toll Brothers is an attractively valued luxury homebuilder trading at a forward price-to-earnings ratio of 10.5x with three earnings beats in the last four quarters, but faces declining revenue of -8% year over year and an overbought chart that has already reached analyst price targets, making the risk-reward unfavorable at current levels.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.2 |
| ROA | 5.0 |
| Gross margin | 1.0 |
| Op margin | 6.0 |
| Net margin | 5.8 |
| Current ratio | 8.4 |
| FCF quality | 3.9 |
| Moat | 4.4 |
| Piotroski F | 6.7 |
- ▸Earnings quality RED FLAG: 49% FCF/NI
- ▸No competitive moat
Growth
0.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.6 |
| EPS growth | 0.0 |
- ▸Declining revenue: -8%
Momentum
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 1.3 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.3 |
| Price target | 5.7 |
| erm sentiment | 5.9 |
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Modest insider selling — $13,468,525 (0.092% of mkt cap)
Peer rank
4.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.7 |
| quality rank | 7.3 |
| growth rank | 4.5 |
Technical
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 3.5 |
| support resistance | 3.1 |
| 52w position | 8.7 |
Risk (lower is worse)
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.0 |
| days to cover | 6.9 |
| volatility | 3.2 |
| put call | 4.3 |
| implied vol | 6.0 |
| beta | 5.7 |
| debt equity | 8.6 |
Catalyst
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.5 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 3.3 |
| dividend safety | 5.2 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 66.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.3>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:46d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.4=NEGATIVE
Warning (2)
- MOMENTUM:5.3<5.5 (soft — BUY_NOW allowed but watch)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.43
Upside
-5.6%
Downside
13.0%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 62, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — Beta 1.33>1.3
Investment implication
The F-path SELL output reflects an overall score of 4.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 7.2) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.4=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.43 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 7.2, Sentiment at 6.4, and Risk (lower is worse) at 6.0; the weakest are Growth at 0.3, Insider at 3.9, and Peer rank at 4.4. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of -0.43 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Beat Streak With Declining Revenue
Trip ifRevenue declines exceed 15% year over year for 2 consecutive quarters, signaling an acceleration of the housing demand contraction.
- P2Attractive Forward Valuation
Trip ifForward price-to-earnings multiple falls below 8x as analysts reduce earnings estimates by more than 20%.
- P3Positive News Sentiment Momentum
Trip ifAnalyst buy ratings drop below 50% of the coverage universe, reflecting a broad sentiment reversal.
- P4Target Reached Price Exhausted
Trip ifPrice falls below $139 stop-loss, more than 6% below the current $148.71, with no upward revision to analyst targets.