NEW YORK (TheStreet) --Shares of Toll Brothers (TOL) - Get Report are down by 2.93% to $35.48 on Thursday afternoon, as home builder stocks take a hit from the unexpected decline in pending home sales for the month of September.
Toll Brothers is a property development company based in Horsham, PA. The company designs, builds, markets and arranges finances for detached and attached homes in luxury residential communities.
Contract signings to acquire previously owned homes declined in September by the most since the end of 2013, Bloomberg reports. This signals that the residential real estate market's recent rise is slowing.
Pending home sales fell by 2.3% in September, following a 1.4% decline for August, according to the National Association of Realtors. Analysts surveyed by Bloomberg were expecting a 1% decline.
Separately, TheStreet Ratings team rates TOLL BROTHERS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate TOLL BROTHERS INC (TOL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- TOLL BROTHERS INC's earnings per share declined by 32.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TOLL BROTHERS INC increased its bottom line by earning $1.84 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.84).
- TOL, with its decline in revenue, underperformed when compared the industry average of 10.0%. Since the same quarter one year prior, revenues slightly dropped by 7.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- TOL's debt-to-equity ratio of 0.81 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Household Durables industry and the overall market, TOLL BROTHERS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: TOL