Water-Logged And Getting Wetter 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 "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) 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 $66.4 million.
  • TOL has traded 1.9 million shares today.
  • TOL traded in a range 279.3% of the normal price range with a price range of $1.75.
  • TOL traded below its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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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 20.8. 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 2.4 million shares per day over the past 30 days. Toll Brothers has a market cap of $6.2 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.18 and a short float of 4.1% with 3.39 days to cover. Shares are down 6.5% year-to-date as of the close of trading on Monday.

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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 10.8%. Since the same quarter one year prior, revenues leaped by 52.3%. 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 0.89, 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 109.7% when compared to the same quarter one year prior, rising from $46.60 million to $97.71 million.
  • Net operating cash flow has significantly increased by 1041.86% to $104.80 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 -67.88%.
  • 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 ($1.85 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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