Toll Brothers, Inc. (TOL)

jpauling352 (29.59) Submitted: 6/18/07 2:31 AM : Start Price: $32.60 TOL Score: -6.75

Toll Brothers trades slightly above book value and is not only profitable, but had a FCF of over $90M for the past 6 months. While anyone can speculate on the near future of home building, a profitalbe company at book value should not have much of downside. Assuming that they are not buring cash of course. Because inventory makes up a very large part of the overall assets, there is a good argument that the book value is overstated. I do not want to take the time to figure out the true value of TOL's inventory, so take that into consideration.

If you can buy into the book value per share of $23 then the company trades close to book. If TOL hits the mean analyst estimate of $1.10 for 2007, then there is only a P/E of 4 factored into the current share price. That is pretty cheap.

Overall, wealthy people will still buy expensive homes regardless of higher mortgage rates, cyclical downturns, or subprime lending concerns. The company is situated where the wealthiest Americans are located as well. The only question regarding this company is how much longer or worse the housing recession will be.

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