hikesterson Synopsis Toll Brothers ( NYSE: TOL ) designs, constructs, and sells luxury residential homes. TOL’s historical financial results have demonstrated robust home sales revenue growth. Additionally, its adjusted home sales gross margin and net income margin have consistently expanded as well.
In 2Q24, revenue continued to grow while margins remained robust year-over-year. US households have been consistently growing since 1945. TOL’s addressable market’s growth, which is households with incomes of more than $200,000, has been outpacing all households’ growth.
Combining this with its current low penetration rate in its addressable market, it means that there are still plenty of opportunities for TOL to capture market share and grow. Additionally, the demand for luxury homes is driven mainly by changes in wealth and an increase in net worth, rather than a change in the mortgage rate. Therefore, the demand for luxury homes is significantly less sensitive to mortgage rate changes.
Overall, I am recommending a buy rating for TOL. Historical Financial Analysis Author's Chart For context, TOL’s total revenue is segmented into home sales revenue and land sales and other revenue. For home sales revenue, it has shown consistent growth over the past three years.
In 2022 , home sales revenue increased to approximately $9.711 billion. This growth was primarily driven by an increase in the number of homes delivered, as well as an increase in the average price of the homes.