This Stock is Looking Strong

Toll Brothers Inc (NYSE:TOL) — This leading builder of luxury homes caters to affluent “move-up” buyers and “empty-nesters.” As of Jan. 31 it was in 321 communities with a focus on growth in coastal states.

In mid-March, Standard & Poor’s Capital reiterated its “Four-Star Buy” opinion and raised its target price to $41, up from $38.

They kept EPS estimate for FY 2017 (Oct.) at $3.15 and FY 2018 at $3.40–noting that 10% to 12% growth in FY 2017 is likely in high-end California developments, and that land holdings by Toll Brothers are more valuable those of its peers.

In January, TOL’s backlog of homes to be delivered was up 21% from a year ago, and yesterday TOL stock cashed in, reporting adjusted earnings of 73 cents per share for FQ2 beating S&P’s estimate of 66 cents and Zack’s estimate of 62 cents.

TOL also beat Zack’s revenue estimates by almost 9%.

In light of S&P’s FQ 2 earnings and revenues, a target price of $41 appears modest, especially in light of the Census Bureau’s release of February construction that showed housing starts up 13.7% and new permits up 13.5%.

In early December, TOL stock broke from a double top at $32 that had marked the upper limit of a sideways trend in 2016. The breakout resulted in a new bull channel supported by a 50-day moving average, now at $36.50, and a bullish support line at about $36.

Although two CBR Sell signals (red dots) appear on May 17 and May 23, they most likely merely represent profit-taking since yesterday’s earnings beat analysts’ estimates. A slight pullback to under $37 should be viewed as an excellent price for traders to take new positions with a price objective of $44. The proposed gain for this trade is over 18%.

– Sam Collins, Trade of the Day

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Source: Investor Place



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