Toll Brothers Continues to Build Momentum

What is the Stock Performance?

Momentum has also been building in housing plays for most of the year. Shares of Toll Brothers and DR Horton (NYSE:DHI) have surged about 60 percent and 53 percent year-to-date, respectively. Lennar (NYSE:LEN), the third largest homebuilder in the United States by revenue, has climbed 90 percent in 2012. Meanwhile, shares of KB Home (NYSE:KBH) and PulteGroup (NYSE:PHM) have more than doubled.

CHEAT SHEET Analysis: Earnings are Increasing Quarter-Over-Quarter

Checking the overall earnings picture for a company is one of the key components in our CHEAT SHEET Investing Framework. Despite the housing bust and overall weak economic conditions, Toll Brothers has increased its earnings for the past four quarters and topped estimates for six of the last eight quarters. Shares have outperformed the market this year, but investors who missed the move may want to wait for a pullback before chasing such a high flyer. Current valuations look high, as Toll Brothers has a price-to-earnings ratio of 59.52, compared to a ratio of only 10.7 on the SPDR S&P Homebuilders ETF (NYSEARCA:XHB).

Investor Insight: Nail in the Coffin for the Housing Recovery Story?