Will Toll Brothers (NYSE:TOL) insiders stop to trade in June?

Toll Brothers is scheduled to announce its earnings today. The next fiscal year end is expected on the 6th of December 2022. As many millenniums are trying to avoid consumer cyclical space, it makes sense to summarize Toll Brothers a little further and try to understand its current market patterns.
Published over a year ago
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Reviewed by Michael Smolkin

The entity has 3.36 B in debt with debt to equity (D/E) ratio of 0.63, which is OK given its current industry classification. The firm has a current ratio of 4.78, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist Toll Brothers until it has trouble settling it off, either with new capital or with free cash flow. So, Toll Brothers' shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Toll Brothers sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Toll Brothers to invest in growth at high rates of return. When we think about Toll Brothers' use of debt, we should always consider it together with cash and equity.
Toll Brothers financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Toll Brothers, including all of Toll Brothers's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Toll Brothers assets, the company is considered highly leveraged. Understanding the composition and structure of overall Toll Brothers debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

How important is Toll Brothers's Liquidity

Toll Brothers financial leverage refers to using borrowed capital as a funding source to finance Toll Brothers ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Toll Brothers financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Toll Brothers' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Toll Brothers' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Toll Brothers's total debt and its cash.

A Deeper look at Toll

The small pull down in market price for the last few months created some momentum for stakeholders as it was traded today as low as 44.1 and as high as 46.54 per share. The company management teams did not add much value to Toll Brothers investors in April. However, diversifying your holdings with Toll Brothers or similar stocks can still protect your portfolio during high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 3.05. The above-average risk is mostly attributed to market volatility and speculations regarding some of the upcoming earning calls from Toll Brothers partners.

Is Toll Brothers getting off balance?

New kurtosis is at -0.5. Toll Brothers exhibits very low volatility with skewness of -0.07 and kurtosis of -0.5. However, we advise investors to further study Toll Brothers technical indicators to make sure all market info is available and is reliable. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Toll Brothers' stock risk against market volatility during both bullying and bearish trends. The higher level of volatility that comes with bear markets can directly impact Toll Brothers' stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Toll Brothers Implied Volatility

Toll Brothers' implied volatility exposes the market's sentiment of Toll Brothers stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Toll Brothers' implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Toll Brothers stock will not fluctuate a lot when Toll Brothers' options are near their expiration.

Our Takeaway on Toll Brothers Investment

While many of the other players in the residential construction industry are either recovering or due for a correction, Toll Brothers may not be performing as strong as the other in terms of long-term growth potentials. While some stakeholders may not share our view we believe that the current risk-reward utility is not appealing enough to do any trading. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Toll Brothers.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Raphi Shpitalnik do not own shares of Toll Brothers. Please refer to our Terms of Use for any information regarding our disclosure principles.

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