Should Value Investors Buy Toll Brothers (TOL) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Neverthe...
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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
One stock to keep an eye on is Toll Brothers (TOL). TOL is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
We also note that TOL holds a PEG ratio of 0.57. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TOL's PEG compares to its industry's average PEG of 0.73. Over the last 12 months, TOL's PEG has been as high as 5.10 and as low as 0.41, with a median of 0.70.
Investors should also recognize that TOL has a P/B ratio of 1.52. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. TOL's current P/B looks attractive when compared to its industry's average P/B of 1.65. TOL's P/B has been as high as 1.68 and as low as 1.05, with a median of 1.37, over the past year.
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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