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On Monday, Toll Brothers Inc. (NYSE:TOL), a prominent home construction company, retained its Outperform rating and a steady price target of $168 from Keefe, Bruyette & Woods. The firm's confidence in Toll Brothers remains strong following the company's fiscal third-quarter performance, which surpassed expectations in terms of home deliveries and profit margins.
The analyst from Keefe, Bruyette & Woods highlighted that after a review of Toll Brothers' fiscal third-quarter results, they have increased forward estimates by 6.5%. This revision is attributed to better-than-anticipated deliveries, gross margin, and SG&A efficiency. The company's fiscal third-quarter achievements exceeded the forecast, particularly regarding deliveries and margins.
Despite a moderation in order growth to 11% year-over-year, compared to the analyst's previous estimate of a 20% increase, expectations are that order growth will pick up pace again. Toll Brothers' stock has seen an uptick, with a 5% increase over the past month, and the analyst foresees potential for further gains driven by continued growth.
The investment firm's outlook on Toll Brothers' shares remains positive, citing the stock's current valuation at 1.7 times the estimated 2025 book value, which is favorable when compared to its large-cap peers trading at approximately 2.05 times.
Keefe, Bruyette & Woods projects a 21% growth in book value by the end of 2025 and anticipates a return on equity (ROE) between 17% and 21%. Based on these projections, the firm has decided to maintain its Outperform rating for Toll Brothers.
InvestingPro Insights
Keefe, Bruyette & Woods' optimistic stance on Toll Brothers Inc. (NYSE:TOL) is further illuminated by key financial metrics and market sentiment. With a market capitalization of $14.71 billion and a price-to-earnings (P/E) ratio standing at a modest 9.96, the company shows a strong financial footing. Adjustments to the last twelve months as of Q3 2024 bring the P/E ratio slightly lower to 9.4, indicating a consistent earnings perspective.
InvestingPro Tips reveal that Toll Brothers has raised its dividend for 3 consecutive years, reflecting a commitment to shareholder returns. Additionally, the company has seen a significant return over the last week, with a price total return of 11.28%, and analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook. These tips, along with 16 more available on InvestingPro, provide a more nuanced understanding of the company's performance and future potential.
From a valuation standpoint, the company's price is hovering near its 52-week high, with the price at 97.52% of this peak. This aligns with the analyst's anticipation of further gains for Toll Brothers' stock. The current dividend yield stands at 0.62%, with a notable dividend growth of 9.52% over the last twelve months as of Q3 2024, underscoring the firm's ability to increase shareholder value.
These insights, derived from real-time data and expert analysis, suggest that Toll Brothers Inc. is navigating the market with a robust strategy, which is reflected in its recent performance and the positive revisions by analysts. Investors may find additional InvestingPro Tips by visiting https://www.investing.com/pro/TOL, which can further assist in making informed investment decisions.
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