TOLL BROTHERS INC (NYSE:TOL) - A Strong Candidate for GARP Investors

TOLL BROTHERS INC (NYSE:TOL) stands out as a potential fit for investors seeking growth at a reasonable price (GARP). The company, a leading luxury homebuilder, meets several key criteria outlined in Peter Lynch’s investment strategy, combining solid growth, profitability, and a reasonable valuation.

Key Strengths

• Strong Earnings Growth: TOL has delivered an impressive 5-year average EPS growth of 27.96%, well above the minimum 15% threshold in Lynch’s strategy. This indicates sustained profitability and operational efficiency.
• Attractive Valuation: With a P/E ratio of 8.03, TOL trades at a discount compared to both its industry peers and the broader S&P 500. Its PEG ratio (0.29) is significantly below 1, suggesting the stock is undervalued relative to its growth prospects.
• Healthy Financials: The company maintains a Debt/Equity ratio of 0.35, indicating a conservative capital structure. Additionally, its Current Ratio of 3.54 reflects strong liquidity, ensuring it can meet short-term obligations.
• Profitability: TOL’s Return on Equity (ROE) of 17.36% exceeds the 15% benchmark, demonstrating effective use of shareholder capital.

Fundamental Overview

Our fundamental analysis rates TOL a 6 out of 10, highlighting its strong profitability and reasonable valuation. The company outperforms most peers in operating margin (16.72%) and profit margin (12.95%). While its dividend yield is modest (0.95%), the payout ratio remains sustainable.

For a deeper dive, review the full fundamental report on TOL.

Our Peter Lynch Strategy screener lists more stocks that fit this approach and is updated regularly.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own research before making investment decisions.