Storm The Castle Stock Of The Day: Toll Brothers (TOL)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Toll Brothers ( TOL) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Toll Brothers as such a stock due to the following factors:

  • TOL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.2 million.
  • TOL has traded 1.3 million shares today.
  • TOL is trading at 1.65 times the normal volume for the stock at this time of day.
  • TOL crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on TOL:

Toll Brothers, Inc., together with its subsidiaries, designs, builds, markets, and arranges finance for detached and attached homes in luxury residential communities in the Unites States. It is also involved in building and selling homes in urban infill markets. TOL has a PE ratio of 24.3. Currently there are 6 analysts that rate Toll Brothers a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Toll Brothers has been 1.8 million shares per day over the past 30 days. Toll Brothers has a market cap of $6.0 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.44 and a short float of 5.7% with 6.13 days to cover. Shares are down 6.6% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Toll Brothers as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • TOL's very impressive revenue growth greatly exceeded the industry average of 9.3%. Since the same quarter one year prior, revenues leaped by 64.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • 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 164.3% when compared to the same quarter one year prior, rising from $24.67 million to $65.22 million.
  • Net operating cash flow has significantly increased by 231.96% to $184.20 million when compared to the same quarter last year. In addition, TOLL BROTHERS INC has also vastly surpassed the industry average cash flow growth rate of 39.67%.
  • TOLL BROTHERS INC reported significant earnings per share improvement 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 reported lower earnings of $0.97 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $0.97).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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