Toll Brothers - prices are going up, but beware

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#1
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
  • 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

[Image: 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?
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