Sunday, July 17, 2016

I was looking over at the Vanguard Funds and the Vanguard REIT Index (VGSIX) jumped out at me with a 23.75% return this year. Some of that is a bid for dividends and total return, but maybe there is more to this US Real Estate story. Let's take a look at Toll Brothers (Symbol TOL).

Dow Jones Industrial Average -18516.55 (UP) Week Ending 07/15/2016

There seems to be something afoot in the Real Estate part of the stock market. I had already discussed Tri-Pointe, (Symbol TPH) ,earlier this year which is doing very well and now I am taking a look at Toll Brothers which is the number 1 builder of new luxury houses in the USA. 

Toll Brothers (Symbol TOL, $27.40) is a company with steadily increasing sales and earnings. It has a PEG Ratio of 0.68 and an ROE (Return on Equity) of 9%.

TOL has a current PE of 13.3 and a forward PE of 9.73 so looking very good as opposed to an overpriced market. The company did sales of $4.5 Billion last year. The one year EPS is up 37.2% and the 3-5 year EPS growth has been 34.3% as the real estate market slowly recovers.

2015 earning per share were $1.97 and 2016 is projecting at $2.58 cents per share.  2017 looking out is projecting at $2.97 per share. 

I think we might want to talk about book value now. The company has a Price to Book ratio of 1.11 which is very low and a current Book value of $24.62 a share. Also the Price to sales is also 1.01 so this stock has not been awarded its due value.

The target price on the stock is $36.62 which would be a 33.64% gain from these prices. Government policy seems to be pointing to keeping interest down and the jumbo loans have come down recently,  all are pointing towards a favorable real estate market.

I have already taken a small position in TOL and plan on adding to it at these prices or below as the market corrects a little. Of course, everyone just needs to have the open floor concept, and the double sinks with the Jacuzzi in the On-Suite- Master bathroom. (Not found in my house!). But alas , there are many people that have lots of money and they will buy Toll Brothers houses and make the stock price go up. The lest I can do is to financially benefit from their good fortune. 

Happy house and stock hunting,


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