Toll Brothers, Inc. (TOL): what the price assumes

In the published model solve dated 2026-Q2, anchored at $155.04, Toll Brothers, Inc. (TOL) is priced for -0.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/TOL

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 10.5% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~4.7pp.

How unusual the bet is: within-range

Valuation X-Ray

The price is supported by asset-based and growth-DCF value, while relative-multiple lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Growth Families that call it expensive: Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Toll Brothers is the luxury specialist among the big builders, delivering homes at an average price approaching $1 million with an adjusted gross margin of 26.2% in its April 2026 quarter, above what D.R. Horton (23.7%) and KB Home (18.9%) report in their own filings.
• The stock trades at 11.1x trailing earnings against an 18x sector median even after every family of valuation method lands at or above the current price, with the macro lever, mortgage rates and affordability, the main thing that could knock the supports away.
• Watch the fiscal third-quarter report against guidance of 2,600 to 2,700 deliveries at $965,000 to $985,000 average price, and the order book after net signed contracts rose 7% in units last quarter.

Bull Case

Toll Brothers is a mature company in the fullest sense, and that is how the numbers ask to be read: not as a growth story, but as a cash-and-discipline story where the questions are what the franchise earns through the cycle and what management does with it. The franchise part is distinctive. This is the only large-scale builder concentrated in luxury, and the license that niche confers shows up in the P&L: second-quarter fiscal 2026 adjusted gross margin of 26.2% beat the company's own guidance by 70 basis points, on homes averaging near $1 million. Among the majors, only PulteGroup's 27.8% gross margin is comparable per its own 10-K; D.R. Horton runs 23.7% and KB Home 18.9%. Affluent buyers, more of whom pay cash or carry small mortgages, are the least rate-hostage demand pool in housing, and management raised full-year delivery, price, and margin guidance in May citing exactly that resilience.

The operating machine is built to protect those economics. The FY2025 10-K describes the deliberate risk management in the land pipeline: the company controls land through options where it "may forfeit deposits on land that we put under control through option arrangements" rather than owning everything outright, and it manages the "extended length of time that it takes to obtain the necessary approvals on a property, complete the land improvements and community amenities, and build and deliver a home" (accession 0000794170-25-000112). Orders are inflecting upward, with net signed contract value up to $2.81 billion and units up 7% year over year in the April quarter even as deliveries lapped a bigger prior-year quarter.

Capital allocation is the quiet compounder. Over the trailing year Toll bought back $676.7M of stock, 52.5% of net income, retiring shares at roughly 11x earnings and 1.7x book, and paid $97.5M in dividends at a payout ratio of just 7.7%, leaving the rest for land and repurchases. Return on equity runs 15.2% with moderate, well-covered leverage. And the strategic backdrop just got a loud endorsement: Berkshire Hathaway agreed on May 31, 2026 to acquire peer builder Taylor Morrison for $72.50 per share in cash, roughly $8.5 billion of enterprise value. When the most patient capital in the market buys a homebuilder outright at a premium, the sector's single-digit-to-low-teens multiples stop looking like a verdict and start looking like an opportunity someone already acted on.

Bear Case

One external variable runs this entire thesis: the interest rate a homebuyer faces, and behind it the affordability math for even affluent households. The company's own risk factors put it plainly, listing costs of materials, labor, "and interest rates. All of these factors can have a negative impact on housing affordability and demand for our homes", and warning that in an inflationary environment it "may be unable to raise the sales prices of our homes at or above the rate of inflation, which could reduce our profit margins" (FY2025 10-K, accession 0000794170-25-000112). The luxury buyer is more insulated than the entry-level buyer, not immune; the April quarter's home sales revenue of $2.51 billion was already down from $2.71 billion a year earlier, with the beat coming from margin and mix rather than volume.

The second exposure is what a demand downturn does to the land machine. Toll's model requires paying today for communities that deliver homes years from now, and the filing spells out the asymmetry: if "housing demand in a given market declines below the levels" anticipated, the company forfeits option deposits or carries impaired land. That is the mechanism by which builder earnings fall much faster than housing volumes in a genuine downturn: margins built on cheap land bought early get rebuilt on expensive land bought late, while incentives eat the price umbrella. Today's 14.6% operating margin is a good-cycle number, and the cyclical question is never whether it is real but how much of it survives the next turn.

The price leaves less room than the cheap headline multiple implies. The market pays about 10 times company-wide operating income, which embeds essentially flat operating profit for five years; that is an easy bar in a stable housing market and a hard one across a downturn, since a multi-year demand slump would push operating income well below flat before it recovers. Free cash flow was positive in only three of the last four quarters, a reminder that land spend makes builder cash flow lumpy. None of this indicts the company, whose balance sheet is safe-zone and whose leverage is well covered. It just means a buyer at 11.1x trailing earnings is not getting the discount for free: they are being paid to hold rate risk, land-cycle risk, and the possibility that fiscal 2026's raised guidance marks the cycle's high-water mark rather than its midpoint.

Valuation

Every family of valuation method lands at or above today's price, a pattern that shows up perhaps a few times per hundred large-cap reports. At $149.36 (July 11, 2026), peer-multiple methods read the price at about 0.8x their central estimate and the forward-growth methods at 0.7x, meaning both sit above the market price; the asset-value and earnings-power families essentially ratify it at 1.1x and 1.2x. The trailing numbers behind that: 11.1x earnings against an 18x homebuilder sector median, 10.3x EV/EBITDA against 12x, and 1.7x a book value of $88.51 per share largely composed of land and homes under construction.

What the price asks going forward is modest to the point of pessimism. The market pays about 10 times company-wide operating income, embedding roughly 0.6% annual operating-profit growth for five years, essentially a bet that the business merely treads water. On the separate margin read, the price requires about a 4.7% long-run operating margin from a business earning around 14.6% today, so no part of today's profitability level is being extrapolated. The demonstrated base is $11.05B of trailing revenue, $1.29B of net income, and $1.22B of free cash flow, an 8.5% free cash flow yield, generated at the gross margins the company documents quarter by quarter, most recently 26.2% adjusted in the April quarter. The filing's land-option structure, where deposits rather than owned inventory carry expansion risk (FY2025 10-K, accession 0000794170-25-000112), is part of why the earnings convert to cash this well.

The balance sheet keeps the downside self-contained: leverage is moderate and well covered, the solvency read is safe-zone, and the share count is falling under a buyback that consumed $676.7M in the trailing year against a token 0.7%-yield dividend. The valuation question is not whether the methods support the price; they all do. It is whether trailing homebuilder earnings deserve full credit this deep into a strong pricing cycle, which is the same question Berkshire Hathaway answered in the affirmative for Taylor Morrison in May.

Catalysts

The second-quarter fiscal 2026 report in late May reset the year upward: revenue of $2.5 billion came in about $110 million above the guidance midpoint, EPS of $2.72 beat by $0.18, adjusted gross margin of 26.2% exceeded guidance by 70 basis points, and management raised full-year guidance to 10,400 to 10,700 deliveries at an average price of $985,000 to $1,000,000, with full-year adjusted home sales gross margin guided to 26.10%. The next print, covering the July quarter, is guided to roughly 2,600 to 2,700 deliveries at $965,000 to $985,000 average price; deliveries and margin against those marks are the primary scorecard.

Demand indicators are the leading edge. Net signed contract value rose to $2.81 billion in the April quarter with units up 7% year over year, so the order line has been outrunning the delivery line; whether that persists through the summer selling season, and what incentives it requires, will show up in both contract value and the margin guide. Mortgage-rate direction remains the macro swing factor the company's own risk disclosures identify as the channel into affordability and demand.

The sector M&A backdrop is newly live. Berkshire Hathaway's agreement to acquire Taylor Morrison for $8.5 billion in enterprise value, announced May 31, 2026 with a shareholder vote set for July 22, has put a cash-buyer's valuation marker under the whole builder group. Any read-through in how the market re-rates surviving public builders, or further consolidation interest, operates directly on a stock trading at 11.1x earnings. Alongside that, the pace of Toll's own buyback, $676.7M over the trailing year, remains a per-share compounding catalyst whenever the discount persists.

Peer Cohorts (Per Segment, With Filing Citations)

Mid-Atlantic / Mountain (reported)

• DHI (D.R. Horton, Inc.)
• FY2025 10-K: …more diverse opportunities to invest in our business and provide a strong platform for us to consolidate market share. 2 Table of Contents We conduct our homebuilding operations in the geographic regions, states and markets listed below. Our homebuilding operating divisions are aggregated into six reporting segments,…
• FY2025 10-K: 0000882184 us-gaap:ContractualRightsMember 2023-10-01 2024-09-30 0000882184 us-gaap:InterestRateLockCommitmentsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2023-09-30 0000882184 us-gaap:DerivativeFinancialInstrumentsAssetsMember…
• LEN (LENNAR CORP /NEW/)
• FY2025 10-K: …2025-11-30 0000920760 us-gaap:OperatingSegmentsMember len:HomebuildingEastMember 2025-11-30 0000920760 us-gaap:OperatingSegmentsMember len:HomebuildingEastMember 2024-11-30 0000920760 us-gaap:OperatingSegmentsMember len:HomebuildingCentralMember 2025-11-30 0000920760 us-gaap:OperatingSegmentsMember…
• FY2025 10-K: 25-11-30 0000920760 len:FivePointUnconsolidatedEntityMember len:LennarHomebuildingEastCentralWestHoustonandOtherMember 2024-11-30 0000920760 us-gaap:LandMember us-gaap:EquityMethodInvesteeMember len:LennarHomebuildingEastCentralWestHoustonandOtherMember 2024-12-01 2025-11-30 0000920760 us-gaap:LandMember…
• PHM (PULTEGROUP, INC.)
• FY2025 10-K: …to exercise our option, which reduces our financial risks associated with long-term land holdings. The remaining purchase price under our land option agreements totaled $10.0 billion at December 31, 2025. 26 Homebuilding Segment Operations Our Homebuilding operations represent our core business. Homebuilding offers a…
• FY2025 10-K: …0000822416 2025 FY FALSE http://fasb.org/us-gaap/2025#OtherAssets http://fasb.org/us-gaap/2025#OtherAssets http://fasb.org/us-gaap/2025#OtherLiabilities http://fasb.org/us-gaap/2025#AccruedLiabilitiesCurrentAndNoncurrent iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure phm:segment 0000822416 2025-01-01…
• NVR (NVR, Inc.)
• FY2025 10-K: …purposes below, the contract land deposit impairment allowance as of December 31, 2025 and 2024 has been allocated to the reportable segments for the respective years to show contract land deposits on a net basis. The net contract land deposit balances below also include approximately $4,600 and $8,700 as of December…
• FY2025 10-K: …2025-01-01 2025-12-31 0000906163 nvr:CorporateReconcilingItemsAndEliminationsMember nvr:MidAtlanticMember nvr:HomeBuildingSegmentMember 2024-01-01 2024-12-31 0000906163 nvr:CorporateReconcilingItemsAndEliminationsMember nvr:MidAtlanticMember nvr:HomeBuildingSegmentMember 2023-01-01 2023-12-31 0000906163…
• KBH (KB HOME)
• FY2025 10-K: …us-gaap:FairValueInputsLevel2Member us-gaap:SeniorNotesMember 2025-11-30 0000795266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member us-gaap:SeniorNotesMember 2024-11-30 0000795266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member…
• FY2025 10-K: Member 2025-11-30 0000795266 kbh:NonVIELandOptionContractsAndOtherSimilarContractsMember 2025-11-30 0000795266 kbh:NonVIELandOptionContractsAndOtherSimilarContractsMember 2024-11-30 0000795266 us-gaap:HomeBuildingMember us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember 2024-12-01 2025-11-30…
• TMHC (Taylor Morrison Home Corp)
• FY2025 10-K: …tmhc:CentralSegmentMember 2025-01-01 2025-12-31 0001562476 us-gaap:OperatingSegmentsMember tmhc:HomeSalesMember tmhc:WestHomebuildingSegmentMember 2025-01-01 2025-12-31 0001562476 us-gaap:OperatingSegmentsMember tmhc:HomeSalesMember tmhc:MortgageOperationsMember 2025-01-01 2025-12-31 0001562476…
• FY2025 10-K: …2024-01-01 2024-12-31 0001562476 us-gaap:OperatingSegmentsMember tmhc:OtherProductAndServiceMember tmhc:WestHomebuildingSegmentMember 2024-01-01 2024-12-31 0001562476 us-gaap:OperatingSegmentsMember tmhc:OtherProductAndServiceMember tmhc:MortgageOperationsMember 2024-01-01 2024-12-31 0001562476…
• TPH (Tri Pointe Homes, Inc.)
• FY2025 10-K: …tph:HomebuildingSegmentMember 2024-01-01 2024-12-31 0001561680 us-gaap:OperatingSegmentsMember us-gaap:LandMember tph:CentralMember tph:HomebuildingSegmentMember 2024-01-01 2024-12-31 0001561680 us-gaap:OperatingSegmentsMember us-gaap:LandMember tph:EastMember tph:HomebuildingSegmentMember 2024-01-01 2024-12-31…
• FY2025 10-K: RetainedEarningsMember 2025-01-01 2025-12-31 0001561680 us-gaap:ParentMember 2025-01-01 2025-12-31 0001561680 us-gaap:NoncontrollingInterestMember 2025-01-01 2025-12-31 0001561680 us-gaap:CommonStockMember 2025-01-01 2025-12-31 0001561680 us-gaap:AdditionalPaidInCapitalMember 2025-01-01 2025-12-31 0001561680…
• CCS (Century Communities, Inc.)
• FY2025 10-K: …ccs:HomeSalesMember ccs:CenturyCompleteMember 2024-01-01 2024-12-31 0001576940 us-gaap:OperatingSegmentsMember ccs:FinancialServicesMember ccs:FinancialServicesSegmentMember 2024-01-01 2024-12-31 0001576940 us-gaap:CorporateNonSegmentMember ccs:HomeSalesMember 2024-01-01 2024-12-31 0001576940…
• FY2025 10-K: …P1Y P3Y P3Y P3Y P3Y false FY 0001576940 Yes Yes No Yes http://fasb.org/us-gaap/2025#PrepaidExpenseAndOtherAssets http://fasb.org/us-gaap/2025#PrepaidExpenseAndOtherAssets http://fasb.org/us-gaap/2025#AccruedLiabilitiesAndOtherLiabilities http://fasb.org/us-gaap/2025#AccruedLiabilitiesAndOtherLiabilities 1 1…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.