TOLL BROTHERS NYSE-TOL
TIMELINESS
SAFETY
TECHNICAL
4
3
5
High:
Low:
Lowered 4/1/16
58.7
32.6
RECENT
PRICE
40.0
22.2
35.6
18.0
28.0
13.5
12.5 RELATIVE
DIV’D
Median: NMF) P/E RATIO 0.59 YLD
29.13 P/ERATIO 10.8(Trailing:
23.6
13.7
23.7
15.6
22.4
13.2
37.1
20.6
39.3
29.6
39.9
28.9
42.2
32.2
Nil
33.4
23.8
Target Price Range
2019 2020 2021
LEGENDS
11.0 x ″Cash Flow″ p sh
. . . . Relative Price Strength
2-for-1 split 7/05
Options: Yes
Shaded area indicates recession
Raised 10/17/97
Lowered 9/2/16
BETA 1.35 (1.00 = Market)
2019-21 PROJECTIONS
VALUE
LINE
120
100
80
64
48
Ann’l Total
Price
Gain
Return
High
60 (+105%) 20%
Low
40 (+35%)
9%
Insider Decisions
to Buy
Options
to Sell
N
0
0
0
D
0
6
1
J
0
9
0
F
0
0
0
M
0
0
0
A
0
0
0
M
0
0
1
J
0
0
0
32
24
20
16
12
J
0
0
0
% TOT. RETURN 8/16
Institutional Decisions
4Q2015
1Q2016
2Q2016
183
190
188
to Buy
to Sell
182
181
163
Hld’s(000) 139758 134630 128293
Percent
shares
traded
75
50
25
1 yr.
3 yr.
5 yr.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
12.51 16.03 16.58 18.93 26.02 37.39 39.79 29.60 19.69 10.66
8.98
8.91 11.16 15.79
1.06
1.60
1.64
1.85
2.83
5.33
4.66
.42 d1.68 d4.44
.10
.38
.94
1.16
.97
1.38
1.46
1.72
2.52
4.78
4.17
.22 d1.88 d4.68
d.02
.24
.79
.97
--------------5.14
6.56
8.04 10.07 12.83 17.84 22.20 22.47 20.19 15.26 15.36 15.61 18.51 19.68
145.05 139.11 140.43 146.64 149.64 154.94 153.90 157.01 160.37 164.73 166.41 165.73 168.64 169.35
5.7
6.5
8.3
7.3
8.3
8.6
7.4
NMF
---NMF
33.1
34.4
.37
.33
.45
.42
.44
.46
.40
NMF
---NMF
2.11
1.93
--------------CAPITAL STRUCTURE as of 7/31/16
Total Debt $3876.9 mill. Due in 5 Yrs $2811.5 mill.
LT Debt $2693.2 mill. LT Interest $120.0 mill.
(Total interest coverage: 5.2X)
(39% of Cap’l)
Leases, Uncapitalized Annual Rentals $11.1 mill.
Pension Assets-10/15 $21.6 mill.
Obligation $35.8 mill.
Pfd Stock None
Common Stock 163,994,000 shs.
as of 9/2/16
MARKET CAP: $4.8 billion (Mid Cap)
CURRENT POSITION 2014
2015
($MILL.)
Cash Assets
616.7
945.8
Receivables
251.6
284.1
6490.3 6997.5
Inventory D
Other
42.1
56.1
Current Assets
7400.7 8283.5
Accts Payable
225.3
237.0
Debt Due
744.5 1000.4
Other
931.4
951.2
Current Liab.
1901.2 2188.6
ANNUAL RATES Past
of change (per sh)
10 Yrs.
Revenues
-2.5%
‘‘Cash Flow’’
-5.5%
Earnings
-6.0%
Dividends
-Book Value
5.0%
Fiscal
Year
Ends
2013
2014
2015
2016
2017
Fiscal
Year
Ends
2013
2014
2015
2016
2017
Calendar
2012
2013
2014
2015
2016
7/31/16
395.0
280.3
7670.5
66.8
8412.6
276.2
1183.7
1072.6
2532.5
Past Est’d ’13-’15
5 Yrs.
to ’19-’21
10.0% 14.0%
- - 16.5%
- - 16.5%
-Nil
5.5% 11.0%
QUARTERLY REVENUES ($ mill.) A
Jan.31 Apr.30 Jul.31 Oct.31
424.6 516.0 689.2 1044.5
643.7 860.4 1056.9 1350.6
853.5 852.6 1028.0 1437.2
928.6 1115.6 1269.9 1785.9
1050 1200 1475 1925
EARNINGS PER SHARE A B
Jan.31 Apr.30 Jul.31 Oct.31
.03
.14
.26
.54
.25
.35
.53
.71
.44
.37
.36
.80
.40
.51
.61
1.03
.48
.58
.75
1.19
QUARTERLY DIVIDENDS PAID
Mar.31 Jun.30 Sep.30 Dec.31
NO CASH DIVIDENDS
BEING PAID
Full
Fiscal
Year
2674.3
3911.6
4171.3
5100
5650
Full
Fiscal
Year
.97
1.84
1.97
2.55
3.00
Full
Year
6123.5
19.2%
39.0%
687.2
11.2%
3586.8
2508.9
4570.0
1491.2
3415.9
15.2%
20.1%
20.1%
--
4647.0
2.8%
49.6%
35.7
.8%
3548.2
2024.2
4590.2
1492.3
3527.2
1.7%
1.0%
1.0%
--
3158.2
NMF
-d297.8
NMF
2604.2
1523.2
4080.2
1486.4
3237.7
NMF
NMF
NMF
--
1755.3
NMF
-d755.8
NMF
2347.9
835.7
3766.9
1635.5
2513.2
NMF
NMF
NMF
--
1494.8
NMF
-d3.4
NMF
2285.9
955.9
3683.2
1544.1
2555.5
1.3%
NMF
NMF
--
1475.9
NMF
-39.8
2.7%
2391.0
1025.7
3788.3
1491.0
2586.4
2.3%
1.5%
1.5%
--
1882.8
4.6%
-135.1
7.2%
2664.5
1096.7
4317.9
2080.5
3121.7
3.8%
4.3%
4.3%
--
2674.3
8.9%
36.3%
170.6
6.4%
2664.5
1096.7
4617.2
2321.4
3333.0
4.2%
5.1%
5.1%
--
THIS
STOCK
VL ARITH.*
INDEX
-15.9
1.6
80.9
10.9
29.8
84.5
© VALUE LINE PUB. LLC
8
19-21
23.50 23.86 31.50 35.75
2.18
2.21
2.90
3.40
1.84
1.97
2.55
3.00
--Nil
Nil
23.15 24.15 26.65 29.75
166.47 174.85 162.00 158.00
19.0
18.5 Bold figures are
Value Line
1.00
.94
estimates
---
Revenues per sh A
46.65
‘‘Cash Flow’’ per sh
4.60
A
B
Earnings per sh
4.00
Div’d Decl’d per sh
Nil
Book Value per sh
42.00
Common Shares Outst’g C150.00
Avg Ann’l P/E Ratio
12.5
Relative P/E Ratio
.80
Avg Ann’l Div’d Yield
Nil
3911.6
10.7%
32.6%
340.0
8.7%
4011.9
2478.4
5499.5
2655.0
3854.4
6.2%
8.8%
8.8%
--
Revenues ($mill) A
Operating Margin
Income Tax Rate
Net Profit ($mill)
Net Profit Margin
Homes Inventory ($mill)
Land Inventory ($mill)
Working Cap’l ($mill)
Long-Term Debt ($mill)
Shr. Equity ($mill)
Return on Total Cap’l
Return on Shr. Equity
Retained to Com Eq
All Div’ds to Net Prof
4171.2
11.3%
32.2%
363.2
8.7%
4888.9
2108.7
6094.9
2689.8
4222.6
6.1%
8.6%
8.6%
--
5100
13.2%
37.5%
445
8.7%
5650
13.5%
38.0%
515
9.1%
5800
2600
4315
7.5%
10.5%
10.5%
Nil
5925
2775
4700
8.0%
11.0%
11.0%
Nil
7000
14.0%
37.5%
660
9.4%
6275
3450
6295
7.5%
10.5%
10.5%
Nil
BUSINESS: Toll Brothers, Inc. is a builder of upscale single-family
detached homes, townhouses, and condominiums located primarily
on land it has developed. The company operates in 19 states and in
50 markets. Sold 5,525 single-family and attached homes in fiscal
2015. Single-family detached homes sell for between approximately
$160,000 and $2,000,000. Company provides financing in conjunc-
tion with several mortgage banking companies. Has approximately
3,900 employees. Robert I. Toll and Bruce E. Toll own 9.3% of the
common stock; BlackRock Inc., 11.0%; JPMorgan Chase, 8.0%
(1/16 Proxy). Chairman: Robert Toll. CEO: Douglas C. Yearley Jr.
Inc.: DE. Address: 250 Gibraltar Road, Horsham, PA 19044. Telephone: 215-938-8000. Internet: www.tollbrothers.com.
We look for Toll Brothers to deliver a
roughly 30% bottom-line advance in
fiscal 2016 (ends October 31st). The
luxury homebuilder was able to shake off
an uneven start to the fiscal year and produce two-consecutive strong quarters, including a 69% earnings surge in the July
period. Toll’s single-family homebuilding
operations have been the primary catalyst,
driven by a healthy pace of home closings
and a continued uptick in the average selling price. A shortage of available homes on
the market has helped pricing, with more
prospective buyers bidding on a smaller
number of available properties. The
homebuilding business has offset a
smaller-than-expected contribution from
joint ventures (JVs) this fiscal year, with
projects expected to be completed in the
current quarter now likely to be finalized
in the first quarter of fiscal 2017.
The earnings momentum should continue in fiscal 2017. New home orders
and the backlog of homes under construction rose 18% and 19%, respectively, in the
July quarter. Given that it takes 10 to 12
months for a Toll Brothers home to be
completed from the time a contract is
signed, revenue and earnings visibility
should remain solid well into next year.
Too, the aforementioned delayed JV
projects will now be realized in fiscal 2017.
Moreover, Toll Brothers continues to support share earnings with an aggressive
stock-buyback program; it repurchased
11.4 million shares through the first nine
months of fiscal 2016. Given these factors,
we think share earnings will reach $3.00
next year.
This stock is untimely. However, we
think it may appeal to those with a longerterm investment horizon. Valued at 1.1
times our 2016 book value-per-share estimate, Toll Brothers stock trades at a discount to many of its homebuilding peers.
And with lending rates likely to rise in the
coming years, as the Federal Reserve begins to tighten the monetary reins, Toll
Brothers’ business is less likely to take a
hit than some of its peers that cater to the
entry-level and first-time move-up markets. Indeed, affluent individuals, who are
the typical buyers of a Toll Brothers property, are less prone to base their purchasing decisions on mortgage-rate levels.
William G. Ferguson
September 23, 2016
(A) Fiscal year ends October 31st.
(C) In millions, adjusted for stock splits.
(B) Diluted earnings. Excludes extraordinary
gains/(losses): ’12, $2.06. Next earnings report
due early December.
(D) Specific identification.
© 2016 Value Line, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
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Company’s Financial Strength
Stock’s Price Stability
Price Growth Persistence
Earnings Predictability
B++
40
50
25
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