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01-09-2023, 07:15 AM
Toll Brothers is a US home-builder that has seen its stock price rising recently. But I have a contrarian view that this is a cyclical company.
As such any analysis and valuation should be based on a cyclical lens. There is a strong correlation between TOL’s revenue and the US Housing Starts.
I looked at 2 Scenarios
TOL is financially sound but not a growth company; it is currently fully priced from a conservative perspective
![[Image: TOLL-cyclical-series.png]](https://i.postimg.cc/ZKSSwhrL/TOLL-cyclical-series.png)
I am a long-term value investor so my analysis and valuation is based on how the company will perform over the cycle. If you want to know more about how I do this, refer to “Do you really want to master value investing?”
As such any analysis and valuation should be based on a cyclical lens. There is a strong correlation between TOL’s revenue and the US Housing Starts.
I looked at 2 Scenarios
- Scenario 1 (no change in long-term annual Housing Starts) shows no margin of safety
- Scenario 2 (increase in long-term annual Housing Starts) does not meet the 30% target margin of safety.
TOL is financially sound but not a growth company; it is currently fully priced from a conservative perspective
I am a long-term value investor so my analysis and valuation is based on how the company will perform over the cycle. If you want to know more about how I do this, refer to “Do you really want to master value investing?”