Toll Brothers Inc.

(TOL)
Nik Tikoo
Real Estate
November 19, 2014

Homebuilder Industry
Main Activities

Construction of single-family homes

Remodeling of residential buildings
Land purchases and development

Key Economic Drivers

Key Statistics

Revenue: $90.4B
Profit: $4.3B
Growth: 8.0% (09-14), 6.4% (14-19)
Wages: $28.6B
Number of Businesses: 173,903

Unemployment rate
Interest rates
Consumer sentiment
Disposable income
GDP growth

Future Outlook

Homebuilder confidence in U.S. at a

nine-year high in 2014
Rising interest rate environment
Some economic uncertainty

Market Segmentation

Low Price

Mid-Price

HighPrice/Luxury

Detached single-family
homes

Toll Brothers

Attached single-family
homes

Toll Brothers

Resort-style residential
communities

Toll Brothers

Toll Brothers Inc. (TOL)

Mission Statement: Toll Brothers is the nation's leading builder of luxury homes. We have a unique
commitment to customer satisfaction, backed by our two-phase pre-settlement inspection, featuring a
checklist of hundreds of items. We've sold over 82,000 luxury homes in prestigious locations throughout 19
states. Our unwavering commitment to our customers can be seen in our quality, service, and value.

Main Products/Services: Builds and sells luxury single-family detached and attached
home communities, luxury residential resort-style golf communities, and urban low-, mid- and
high-rise communities, principally on land it develops and improves.

Headquarters/Geographic Coverage: HQ in Horsham, PA. Geographic coverage

includes metropolitan and affluent suburban areas such as Philadelphia, northern NJ,
Manhattan, Brooklyn, Westchester, DC, Seattle, Phoenix, Las Vegas, Chicago, and Denver.

People: Robert I. Toll, Executive Chairman of the Board (Cornell alum); Douglas C.
Yearley Jr., CEO and Director (AEM alum); Martin P. Connor, CFO. Toll Brothers has
3,019 full-time employees.
Major Projects/News: Pre-earnings release on 11/10/14; revenue in most recent
quarter increased by 29% and average home price for the company increased from
$703,000 to $747,000.

Toll Brothers Inc. (TOL)

Revenue: 2.67B
Open: 33.60
Sales Growth: 42.0% (2012-2013) 1y Target Estimate: 37.43
Net Income: 170.6M
Beta: 1.02
Total Assets: 6.83B
52 week Range: 28.92-39.95
Current Price: 33.72
Average Volume: 2.36M
Previous Close: 33.73
Market Cap: 6.00B

P/E: 20.34
PEG: 0.51
EPS: 1.66
Dividend & Yield: N/A

Competitor Analysis
Company

Description

Geographic Reach

Key Financials

27 states, mainly in the

West and South Central
US. HQ in Dallas, TX.

Market Cap: 8.89B

P/E: 16.25
*PEG: 1.41
EPS: 1.50
Dividend/Yield: 0.25 (1.00%)

Market Cap: 9.37B

P/E: 18.53
*PEG: 1.23
EPS: 2.46
Dividend/Yield: 0.16 (0.40%)

DR Horton
(DHI)

Largest residential
homebuilder in US.
Builds singledetached buildings.
Est. 1978

Lennar Corp.
(LEN)

Builds single-family
attached and
detached homes.
Second largest
homebuilder in the
US. Est. 1954

18 states across the

country. HQ in Miami,
FL.

PulteGroup,
Inc. (PHM)

Buys land to build

single-family houses,
duplexes,
townhouses, and
condos. Est. 1950

Market Cap: 7.76B

50 markets in 25 states.
P/E: 16.80
Founded in Bloomfield,
*PEG: 2.76
MI. HQ moved to
EPS: 1.25
Atlanta, GA.
Dividend/Yield: 0.32 (1.50%)

*PEG Ratio is 5 year expectation

DCF Analysis

Toll Brothers Inc. (TOL) Buy

GDP, personal income, unemployment rate positives

Housing market has been improving gradually
Post-housing boom excess inventory has been cleared
Credit standards for mortgage loans are loosening
MRQ was so good that a pre-earnings release was made
Monopoly in luxury segment; luxury buyers first to recover
High current ratio and low debt-to-equity ratio
Low PEG Ratio of .5 (much lower than that of competitors)
Implied price based on DCF is $49; 46% price upside
Recent performance is pushing stock upward; price
momentum should continue into and after earnings release