Let's talk about the popular Toll Brothers, Inc. (NYSE:TOL). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$135 at one point, and dropping to the lows of US$112. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Toll Brothers' current trading price of US$112 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Toll Brothers's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What's The Opportunity In Toll Brothers?

Good news, investors! Toll Brothers is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Toll Brothers's ratio of 7.29x is below its peer average of 10.16x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. Although, there may be another chance to buy again in the future. This is because Toll Brothers's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Toll Brothers?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.4% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Toll Brothers. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although TOL is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to TOL, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you've been keeping an eye on TOL for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Toll Brothers as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Toll Brothers (1 is concerning!) that we believe deserve your full attention.

If you are no longer interested in Toll Brothers, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com