TOL Stock Report

2-Year Price History

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Ockham's Rating

TOL Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, TOL the high and low end of the Price to Sales per share ratios are 1.11x and 0.56x respectively.

Notice that TOL's current Price to Sales per share ratio is 1.02x, which is high enough compared with historical norms of TOL to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 21% merely to return TOL to its historical average.

TOL Cash Earnings

TOL is not forecasted to produce positive Cash Earnings this year, based on recent performance. This is not a positive situation, as we would always prefer that a company is producing cash every year. However, it is important to recognize that not all companies or types of companies have the goal of producing positive Cash Earnings either early in their business cycle or following significant turnaround changes. When looking at TOL, we hesitate to be overly negative on the company, but it is of concern that the company is not profitable at this time. Let's face it, companies cannot remain unprofitable for very long before a change has to be made. This could mean further restructuring or corporate event such as selling assets or spinning off divisions, at any rate a company with negative cash flows is not one that often makes a great investment unless you can acquire it at an extremely depressed price.

TOL Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for TOL to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. TOL may pay a dividend at this time; however, there is an insufficient amount of history to incorporate it into our analysis. Therefore, we are not utilizing the dividends or lack thereof in our study. As TOL more consistent dividend history is made available, we will begin to factor this into the Ockham approach.