TOLL BROTHERS INC (NYSE:TOL) - A GARP Candidate in the Homebuilding Sector

TOLL BROTHERS INC (NYSE:TOL) stands out as a potential fit for growth-at-a-reasonable-price (GARP) investors, according to our Peter Lynch-inspired stock screener. The company, a leading luxury homebuilder in the U.S., demonstrates strong profitability, manageable debt, and consistent growth—all while trading at an attractive valuation.

Key Strengths

• Earnings Growth: TOL has delivered a 5-year average EPS growth of 27.96%, well above the 15% minimum threshold in our screen. This reflects sustained demand for its high-end residential properties.
• Reasonable Valuation: With a PEG ratio of 0.31 (far below the target of ≤1), the stock appears undervalued relative to its growth trajectory. The P/E ratio of 8.72 also compares favorably to industry peers.
• Strong Profitability: A return on equity (ROE) of 17.36% and healthy operating margins (16.72%) indicate efficient capital allocation and pricing power.
• Solid Financial Health: A debt-to-equity ratio of 0.35 and current ratio of 3.54 suggest a conservative balance sheet with ample liquidity.

Fundamental Snapshot

Our full analysis rates TOL a 6/10, noting its standout profitability (8/10) and fair valuation (6/10). While revenue growth is expected to moderate slightly (~7% annually), the company’s focus on luxury homes and operational efficiency supports its competitive edge.

Why It Fits the GARP Approach

Peter Lynch favored companies with understandable business models, sustainable growth, and reasonable valuations—criteria TOL meets. Its niche in premium housing, combined with disciplined financial management, aligns with Lynch’s principles of investing in "what you know."

For more stocks matching this strategy, explore our Peter Lynch Screen.

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.