Toll Brothers (TOL, Financial) reported decent numbers for the fourth quarter, with both profit and revenue up from a year ago period. The company continues to benefit from a slow recovering housing market, which bolstered its business during the quarter. However, its earnings failed to match the street expectations, but it doesn’t seem to be a matter of big concern as the company could do even better in the days ahead. Starting with its numbers, let’s have a detailed analysis of this stock.
Its revenue for the quarter rose 29.3% to $1.35 billion from a year ago period and came in line with the analysts expectations. Earnings on the other hand increased to 71 cents a share from 53 cents last year but fall short of the 73 cents consensus estimate. Brothers also increased the average selling price per unit to $747,000 from $703,000 last year.
The outlook is even better
These are pretty encouraging results, which is further supported by an improving economy. Although the market was expecting a higher recovery than this yet in a challenging economy even mild recoveries should be encouraged. Reports have shown that people are more interested in previously owned homes, which has rebounded after having a weak start, while new home sales is barely showing any strength.
All in all it seems quite confusing and difficult to predict a clear path as to what would happen in the days ahead. Going forward, the management hopes to keep the same momentum in the coming months. Albeit slow but the housing market continues to grow, which will further strengthen the company. Currently it has a trailing P/E of 18.6, while its forward P/E looks impressive at 13.48 reflecting significant improvement in its earnings. The company touched its 52-week low in October and since then rose considerably.
However, some analysts are of the view that Toll Brothers have premium valuations compared to its peers such as Lennar (LEN, Financial) and DR Horton (DHI, Financial) among others. In the light of these facts investors need to be careful while choosing a stock in the housing market.
