Rating Change #2
Toll Brothers Inc (TOL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 30.3%. Since the same quarter one year prior, revenues rose by 18.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TOLL BROTHERS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TOLL BROTHERS INC turned its bottom line around by earning $0.24 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus $0.24).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 181.2% when compared to the same quarter one year prior, rising from -$20.77 million to $16.87 million.
- Powered by its strong earnings growth of 183.33% and other important driving factors, this stock has surged by 31.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- TOL's debt-to-equity ratio of 0.74 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
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