NEW YORK (TheStreet) --Shares of Toll Brothers Inc. (TOL) are up by 1.82% to $37.48 at the start of trading on Thursday morning, following a rating upgrade to "outperform" from "neutral" at Credit Suisse.
The firm raised its rating on the home builder as it believes Toll Brothers will be able to deliver more city living units next year.
"We believe consensus fails to fully capture the benefit of sharply higher city living deliveries in 2016. In addition, our Monthly Survey of Real Estate Agents suggests continued price appreciation in CA, where TOL has an increasingly strong position," Credit Suisse said in an analyst note.
The firm hiked its price target on Toll Brothers stock to $42 from its previous $40 price target.
Separately, TheStreet Ratings team rates TOLL BROTHERS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TOLL BROTHERS INC (TOL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, increase in net income and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TOLL BROTHERS INC has improved earnings per share by 5.7% 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 year. We feel that this trend should continue. 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 ($2.10 versus $1.84).
- The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- TOL, with its decline in revenue, underperformed when compared the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- In its most recent trading session, TOL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 4.2% when compared to the same quarter one year prior, going from $65.22 million to $67.93 million.
- You can view the full analysis from the report here: TOL Ratings Report