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Should Value Investors Buy Toll Brothers (TOL) Stock?

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Toll Brothers (TOL - Free Report) is a stock many investors are watching right now. TOL is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.21, which compares to its industry's average of 10.13. Over the last 12 months, TOL's Forward P/E has been as high as 8.14 and as low as 3.80, with a median of 5.12.

Investors will also notice that TOL has a PEG ratio of 0.66. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TOL's industry currently sports an average PEG of 0.81. Over the past 52 weeks, TOL's PEG has been as high as 0.90 and as low as 0.28, with a median of 0.66.

We should also highlight that TOL has a P/B ratio of 1.08. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.20. TOL's P/B has been as high as 1.11 and as low as 0.78, with a median of 1.01, over the past year.

Finally, investors should note that TOL has a P/CF ratio of 4.84. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.31. Over the past 52 weeks, TOL's P/CF has been as high as 6.12 and as low as 3.46, with a median of 4.72.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Toll Brothers is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TOL feels like a great value stock at the moment.


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